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S. HRG. 106–1138

OVERSIGHT HEARING ON AMTRAK

HEARING

BEFORE THE

COMMITTEE ON COMMERCE, 

SCIENCE, AND TRANSPORTATION 

UNITED STATES SENATE

ONE HUNDRED SIXTH CONGRESS

SECOND SESSION

SEPTEMBER 26, 2000

Printed for the use of the Committee on Commerce, Science, and Transportation

(

(II)

SENATE COMMITTEE ON COMMERCE, SCIENCE, AND TRANSPORTATION

ONE HUNDRED SIXTH CONGRESS

SECOND SESSION

JOHN MCCAIN, Arizona, Chairman 

TED STEVENS, Alaska 

CONRAD BURNS, Montana 

SLADE GORTON, Washington 

TRENT LOTT, Mississippi 

KAY BAILEY HUTCHISON, Texas 

OLYMPIA J. SNOWE, Maine 

JOHN ASHCROFT, Missouri 

BILL FRIST, Tennessee 

SPENCER ABRAHAM, Michigan 

SAM BROWNBACK, Kansas 

ERNEST F. HOLLINGS, South Carolina 

DANIEL K. INOUYE, Hawaii 

JOHN D. ROCKEFELLER IV, West Virginia 

JOHN F. KERRY, Massachusetts 

JOHN B. BREAUX, Louisiana 

RICHARD H. BRYAN, Nevada 

BYRON L. DORGAN, North Dakota 

RON WYDEN, Oregon 

MAX CLELAND, Georgia 

MARK BUSE, Republican Staff Director 

ANN CHOINIERE, Republican General Counsel 

KEVIN D. KAYES, Democratic Staff Director 

MOSES BOYD, Democratic Chief Counsel 

(III)

C O N T E N T S 

Page 

Hearing held on September 26, 2000 ..................................................................... 1

Statement of Senator Cleland ................................................................................. 103

Statement of Senator Kerry .................................................................................... 73

Prepared statement .......................................................................................... 82

Statement of Senator McCain ................................................................................. 1

Prepared statement .......................................................................................... 3

Statement of Senator Snowe ................................................................................... 106

Statement of Senator Wyden .................................................................................. 4

WITNESSES

Allard, Hon. Wayne, U.S. Senator from Colorado ................................................. 14

Carmichael, Gilbert E., Chairman, Amtrak Reform Council ............................... 34

Prepared statement .......................................................................................... 37

Coston, James E., Attorney, Chicago, IL, prepared statement ............................ 95

Kaine, Hon. Timothy M., Mayor of Richmond, VA, on Behalf of the U.S. 

Conference of Mayors, Boise, ID ......................................................................... 83

Prepared statement .......................................................................................... 86

Mead, Kenneth M., Inspector General, U.S. Department of Transportation ..... 5

Prepared statement .......................................................................................... 8

Scheinberg, Phyllis F., Associate Director, Transportation Issues, U.S. General Accounting Office .......................................................................................... 25

Prepared statement .......................................................................................... 27

Thompson, Gov. Tommy, Chairman of the Amtrak Reform Board, Accompanied by George Warrington, President, National Railroad Passenger Corporation ................................................................................................................. 20

Prepared statement .......................................................................................... 22

Vranich, Joseph, Irvine, CA .................................................................................... 51

Prepared statement .......................................................................................... 53

APPENDIX

Capon, Ross B., Executive Director, National Association of Railroad Passengers, prepared statement ............................................................................... 110

Selden, Andrew C., Vice President—Law and Policy, United Rail Passenger 

Alliance, Inc., letter dated August 24, 2000 to Senator McCain ...................... 109

(1)

OVERSIGHT HEARING ON AMTRAK 

TUESDAY, SEPTEMBER 26, 2000

U.S. SENATE, COMMITTEE ON COMMERCE, SCIENCE, AND TRANSPORTATION, Washington, DC. 

The Committee met, pursuant to notice, at 9:30 a.m. in room SR–

253, Russell Senate Office Building, Hon. John McCain, Chairman 

of the Committee, presiding. 

OPENING STATEMENT OF HON. JOHN MCCAIN,

U.S. SENATOR FROM ARIZONA 

The CHAIRMAN. Good morning. Today’s hearing will be the first 

Amtrak oversight hearing by the full Committee since we approved 

comprehensive reform legislation nearly 3 years ago. Clearly not all 

Members of this Committee share the same perspective concerning 

the obligation imposed on the American taxpayers to fund Amtrak 

for what is now in its 29th year of subsidization, and more than 

$23 billion, even though Amtrak was to have been free of all federal assistance 2 years after it was established long ago in 1971. 

However, we did all work collectively on reform legislation, with 

the intent to give Amtrak the tools it said it needed to become 

operationally self-sufficient. I am eager to learn what progress Amtrak has made toward achieving that statutory goal. 

More important, we must examine whether the statutory provisions shepherded by this Committee will even be relevant if Amtrak and others are successful in enacting the $10 million bond 

funding scheme being pushed forward by the Senate Financing 

Committee. Despite my urging to the contrary, last week the Finance Committee was expected to report out legislation which included the bonding authority for Amtrak. The actual legislative 

language has still not been made available, but their postponed 

markup is now expected to occur this week. 

So far, this multibillion blank check has managed to sail through 

without even a single hearing by the Finance Committee, just like 

when it found a way to give Amtrak $2.2 billion in tax refunds, 

even though Amtrak has never earned a profit nor paid corporate 

taxes. 

There is a nagging feeling of deja vu, and I fear once again the 

American taxpayers will pay the price. As Chairman of the authorizing Committee, I will not sit idly by for another committee to effectively nullify the 1997 reform legislation developed by this Committee. I intend to do all I can to put the spotlight on how this 

funding scheme will impact the federal taxpayers and the legal obVerDate Apr 24 2002 09:19 Dec 10, 2003 Jkt 085968 PO 00000 Frm 00005 Fmt 6633 Sfmt 6633 S:\WPSHR\GPO\DOCS\85968.TXT SCOM1 PsN: CAROLT
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ligations of the federal government, not to mention the spirit of the 

1997 reform legislation. 

During this hearing, Amtrak will present a glowing report on its 

achievements. I caution my colleagues to not tune out those who 

will testify about the less than glowing facts. While Amtrak will 

discuss last year’s record-setting year and this year’s growing ridership revenues, the Department of Transportation Inspector General 

will report that Amtrak has also been experiencing its largest operating losses in history during the same record-setting period. 

Again, Amtrak has been experiencing its largest losses in history 

at the time when our Nation’s economy has been at its strongest. 

Yet we would never know about these losses if we only relied on 

Amtrak’s press releases. We never hear that Amtrak’s expenses are 

rising, or that its ridership and revenue gains are actually below 

the levels projected in Amtrak’s strategic business plan. I cannot 

understand how Amtrak can so easily issue press releases about its 

seemingly glowing statistics and outright ignore the realities of the 

bigger financial picture. To my knowledge, no legitimate business 

enterprise in this country could get away with deceiving its stakeholders in the manner Amtrak has been doing in its press releases 

about ridership and revenues. 

Obviously, ridership is not the end-all Amtrak wants us to think 

it is, if Amtrak is experiencing astronomical operating losses at the 

same time it is touting its ridership. Further, if you actually look 

at Amtrak’s ridership historically, you will find that last year’s 

record ridership was essentially at the same level it was in 1979. 

Amtrak’s stagnant ridership cannot be ignored, particularly given 

the growth experienced by other passenger modes. 

In the past decade, car travel is up 25 percent, bus travel is up 

7 percent, and air travel is up 37 percent. And, let us consider the 

actual ridership level comparison. Inner city buses carried 357 million passengers annually, compared to Amtrak’s 21 million. That is 

17 times more passengers. Airlines carry 582 million passengers, 

28 times more than Amtrak carries, but we are supposed to be impressed that Amtrak’s ridership is at the same level it was 20 

years ago, and we will be asked to continue pumping billions of dollars in a form of transportation that the majority of the traveling 

public is not interested in utilizing outside of the Northeast. 

If we are serious about fulfilling our responsibilities, we need to 

consider all of the facts, good and bad. We need to oversee Amtrak 

based on its actual financial results and service demand. This cannot be accomplished if we allow our objectiveness to be overridden 

by notions of nostalgia and a single goal of retaining a form of 

transportation from yesteryear regardless of the cost. 

Perhaps today we cannot make a definitive conclusion on whether Amtrak can meet its statutory requirement to be free of operating assistance by the end of 2002. According to the recent report 

by the Inspector General, however, it is next to impossible. 

But one thing is certain today. Amtrak needs to make more 

progress before any further funding schemes are enacted, particularly schemes in which another committee is effectively authorizing 

Amtrak as a federal monopoly for another 30 years. 

I welcome today’s witnesses, and look forward to hearing their 

testimony. 

3

Senator Wyden. 

[The prepared statement of Senator McCain follows:]

PREPARED STATEMENT OF HON. JOHN MCCAIN, U.S. SENATOR FROM ARIZONA

Today’s hearing will be the first Amtrak oversight hearing by the Full Committee 

since we approved comprehensive reform legislation nearly 3 years ago. 

Clearly, not all Members of this Committee share the same perspective concerning 

the obligation imposed on the American taxpayers to fund Amtrak for what is now 

in its 29th year of subsidization—and more than $23 billion dollars—even though 

Amtrak was to have been free of all federal assistance 2 years after it was established in 1971. However, we did all work collectively on the reform legislation with 

the intent to give Amtrak the tools it said it needed to become operationally selfsufficient. I am eager to learn what progress Amtrak has made toward achieving 

that statutory goal. 

The Amtrak Reform and Accountability Act of 1997 provided the operational, procurement, labor, and liability reforms that Amtrak requested so it could operate 

more like a legitimate business. The reforms were designed to allow Amtrak to run 

its operations based on good business decisions, rather than political pressures. For 

example, the reforms allowed Amtrak to set its own route structure, instead of conforming to a statutory mandate. The reforms allowed Amtrak to contract out work 

where Amtrak decides it makes sense to do so. The reforms further allowed Amtrak 

to negotiate more reasonable labor protection agreements in lieu of the statutory 

six-year guaranteed severance. I will be very interested in learning how Amtrak has 

utilized its new authorities and what cost savings these long sought after reforms 

have actually generated. 

In another area, the law required the Department of Transportation Inspector 

General (DOT–IG) to oversee an independent audit of Amtrak’s financial books in 

order to establish a performance bench-mark. Subsequent annual audits by the 

DOT–IG were also required. In addition, the law created an 11-member Amtrak Reform Council (ARC) to review Amtrak’s operations and financial results and make 

recommendations to help Amtrak improve both operationally and financially. Today 

we will hear from the DOT–IG and the ARC on their findings and perspective about 

Amtrak’s future. The General Accounting Office (GAO) will also provide us with an 

overview on their various reports. 

As I said, during this hearing we will hear about Amtrak’s progress toward meeting the statutory requirement of operational self-sufficiency. I am sure that Amtrak 

will present a glowing report on its achievements. But I caution my colleagues to 

not tune out those who will testify about the less glowing facts. For instance, Amtrak will discuss last year’s ‘‘record setting year’’ and this year’s growing ridership 

statistics. However, we will also be told by the DOT–IG that during the same 

‘‘record setting’’ year, Amtrak also experienced its largest operating losses in history. 

Amtrak’s operating loss for FY 1999 was $907 million and its projected loss for this 

year is nearly as great. 

Again, Amtrak has been experiencing its largest losses in history at the time when 

our nation’s economy has been at its strongest. Yet we would never know about Amtrak’s losses if we only relied on Amtrak’s press releases. I for one, cannot understand how Amtrak can so easily issue press releases about its seemingly glowing 

statistics and outright ignore the realities of the bigger financial picture. To my 

knowledge, no legitimate business enterprise in this country could get away with 

deceiving its stakeholders in the manner Amtrak has been doing in its press releases about ridership and revenues. Sure, ridership has been up a month here and 

there—and that’s great news. But, obviously, ridership is not the end-all we would 

expect it be if Amtrak is experiencing astronomical operating losses at the same 

time it is touting its ridership. 

Further, if you actually look at Amtrak’s ridership historically, you will find that 

last year’s ‘‘record ridership’’ is essentially at the same level it was in 1979! Yes, 

its ridership was 21.4 million in 1979 and 21.5 million in 1999. But no one relying 

only on Amtrak’s cheers would ever know this to be the case. 

Amtrak’s stagnate ridership shouldn’t be ignored particularly given the growth experienced by other passenger modes. In just the past decade, car travel is up 25 percent, bus travel is up 7 percent and air travel is up 37 percent. And let’s consider 

the actual ridership level comparison: intercity buses carry 357 million passengers 

annually compared to Amtrak’s 21 million—that is 17 times more passengers. Airlines carry 582 million passengers—28 times more than Amtrak carries. But we are 

supposed to be impressed that Amtrak’s ridership is at the same level it was 20 

years ago and we’ll be asked to continue pumping billions of dollars into a form of 

4

transportation that the majority of the traveling public isn’t interested in utilizing 

outside of the Northeast. 

If we are serious about fulfilling our responsibilities, we need to consider all of 

the facts, good and bad. We need to oversee Amtrak based on its actual financial 

results and service demand. This cannot be accomplished if we allow our objectiveness to be overridden by nostalgia, and the notion of retaining a form of transportation from yesteryear at no matter what cost. 

We cannot predict today whether Amtrak will meet its statutory requirement to 

be free of operating assistance by the end of 2002. Some are certain Amtrak will 

reach operational self sufficiency. Some, like the DOT–IG, are skeptical and still 

others consider it virtually impossible. But I am certain about one thing: Amtrak 

needs to make more progress before any further funding schemes are considered. 

I am strongly opposed to Amtrak’s efforts to enact legislation to provide it up to 

$10 billion of additional funding above and beyond that provided in Amtrak’s existing authorization as developed by this Committee. This latest proposal is being sold 

as a way to fund high speed rail projects across the country through the issuance 

of Amtrak bonds. It is too bad there isn’t a single highspeed route in operation today 

to give us any real inkling if the traveling public would utilize highspeed service 

at a rate to even come close to making it cost effective beyond the Northeast Corridor. Why should we hand over billions of more dollars to Amtrak to selectively invest in highspeed corridors when it hasn’t been able to effectively carry out its underlying mission? 

Intercity rail passenger ridership has remained essentially unchanged during Amtrak’s near 30-years of operation and $23 billion dollars in subsidies, while ridership 

via other transportation modes has fastly grown. Amtrak’s capital needs are projected by the GAO to be $4 billion dollars through 2004 and at least another $5.1 

billion dollars through 2015. I would think it would make a lot more sense for Amtrak and its proponents to focus their efforts on finding a way to fund these already 

identified capital infrastructure needs before looking to spend billions of dollars on 

service not even in operation. 

More important, Amtrak has not yet fulfilled the operating self-sufficiency mandate required under the law. Therefore, I find it very premature, at best, to be pushing a new $10 billion funding proposal at this juncture. I will nevertheless be very 

interested to learn how the proposed bond legislation, if enacted, would impact the 

federal taxpayers, the legal obligations of the federal government, and the spirit of 

the 1997 Act. And, if enacted, will Amtrak cease to expect future federal subsidies 

entirely? Somehow, I doubt it. 

I welcome today’s witnesses and look forward to hearing their testimony.

STATEMENT OF HON. RON WYDEN,

U.S. SENATOR FROM OREGON 

Senator WYDEN. Thank you, Mr. Chairman. I very much appreciate your holding this oversight hearing. I personally think a 

whole lot more oversight needs to be done in the U.S. Congress, 

and I am glad that you are going forward with today’s hearing. 

Once again we have another troubling Inspector General report 

about Amtrak. This one shows very clearly that Amtrak continues 

to employ Alice in Wonderland financial analysis. For more than a 

year, both the Inspector General and the General Accounting Office 

have been raising concerns that Amtrak is not going to meet its 

legal obligation to become subsidy free by 2003. 

Despite these warnings, Amtrak keeps issuing rosy projections 

and asserting that its business plan is going to make the railroad 

self-sufficient one year ahead of schedule. The recent Inspector 

General report states that Amtrak’s business plan will not achieve 

operating self-sufficiency in 2003. 

When it unveiled this plan, Amtrak claimed realigning its routes 

would generate an additional $105 million in revenue, but one of 

the key auditors says, and I quote, ‘‘Amtrak never gave us any support for their numbers,’’ unquote. In reality, the new high-speed 

5

trains which are the linchpin of Amtrak’s plan for financial solvency run into delay after delay. Originally scheduled to begin running last fall and generate $180 

million in profits next year, these trains still have not gone into 

service. Even as it became clear that the trains were not going to 

run as scheduled, Amtrak officials continued to insist that the 

delay would not have a negative financial impact. 

The bottom line is, the numbers say one thing, Amtrak insists 

on something else. Recently a member of the Amtrak Reform Council created by the Amtrak Reform Accountability Act resigned on 

the grounds that Amtrak was making decisions to add pork barrel 

trains to the districts or home towns of politically connected officials. Despite a legislative mandate, the Amtrak Reform Accountability Act, and commitments to Congress that Amtrak would 

achieve operational self-sufficiency, Amtrak continues to ignore financial reality and play politics with its routes. 

I would just like to emphasize how strongly I feel about that 

point, Mr. Chairman, because there is no question that Amtrak is 

playing politics with these new routes and what it is doing with respect to assigning them. Governor Thompson, to his credit, in one 

of our last hearings acknowledged that the route in Eastern Oregon 

should not have been eliminated. 

If you will look at those routes, strictly on the merits, that route 

in Eastern Oregon should not have been eliminated. Fortunately 

Tommy Thompson has got some candor chromosomes in there, and 

he admitted it, and I appreciate that, but Amtrak still has not addressed the problem, and this Senator is going to stay with it until 

we start calling these routes on the merits. 

This is just no way to run a railroad in this country. We ought 

to start moving to get Amtrak operating in an efficient manner before it becomes a financial train wreck and the taxpayers are left 

to pick up the pieces. It is time to make decisions at this agency 

on the merits, and not with respect to politics, and I look forward 

again, Mr. Chairman, to working with you on a bipartisan basis in 

this regard. 

The CHAIRMAN. Thank you, Senator Wyden. 

Our panel today is the Hon. Kenneth Mead, Inspector General, 

U.S. Department of Transportation, Governor Tommy Thompson, 

the chairman of the Amtrak Reform Board. He is accompanied by 

George Warrington, who is the president of the National Railroad 

Passenger Corporation. Mrs. Phyllis Scheinberg, who is the Associate Director of Transportation Issues, U.S. General Accounting 

Office, Mr. Gilbert Carmichael, who is the chairman of the Amtrak 

Reform Council, Mr. Joseph Vranich, and Hon. Timothy M. Kaine, 

mayor of Richmond, Virginia, on behalf of the U.S. Conference of 

Mayors. 

Welcome before the Committee, Mr. Mead. 

STATEMENT OF HON. KENNETH M. MEAD, INSPECTOR 

GENERAL, U.S. DEPARTMENT OF TRANSPORTATION 

Mr. MEAD. Thank you, Mr. Chairman. Last week we issued our 

most recent congressionally mandated report on Amtrak. The good 

news is that Amtrak’s revenue and ridership showed marked improvement in 1999 and continued to do so in 2000. That improveVerDate Apr 24 2002 09:19 Dec 10, 2003 Jkt 085968 PO 00000 Frm 00009 Fmt 6633 Sfmt 6601 S:\WPSHR\GPO\DOCS\85968.TXT SCOM1 PsN: CAROLT
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ment has undoubtedly been moved along by the economy and in 

the Northeast Corridor is certainly facilitated by aviation delays 

and cancellations and aviation system congestion. 

That has not been sufficient to turn the tide, though. Essentially, 

in order for Amtrak to become self-sufficient by 2003 it will need 

to aggressively curtail expense growth, which is offsetting revenue 

gains—there is still nearly three quarters of a billion dollars in undefined management actions in its business plan—launch Acela 

high-speed rail service, and secure sufficient capital to support its 

basic needs. I will take each of these points briefly in turn and 

then make a few observations on S. 1900. 

The Financial Status. This year, passenger revenues improved by 

nearly 9 percent, ridership by about 4 percent. Also, nonpassenger 

revenues showed a strong 9.7 percent growth in 1999 and over 15 

percent in 2000, and these nonpassenger-related revenues now account for an amazing—at least it is amazing to me—over 40 percent of the total operating revenues. Certainly, that area has been 

improving. 

But at the same time, system expenses have grown significantly, 

nearly 7 percent in 1999 and so far this year an additional 7.8 percent over last year. Interest expense on debt grew rapidly in the 

nineties, and it will be over $100 million per year in 2001. 

Amtrak’s cash loss in 1999 was $579 million, the highest in a decade. We project the cash loss will decline in 2000 to $521 million, which will be the lowest since 1992, but substantially greater 

declines will be necessary under Amtrak’s mandate. Unless Amtrak 

can find a way to curtail expense growth, and soon, we doubt that 

Amtrak will be able to reach self-sufficiency by 2003. 

Mr. Chairman, we examined Amtrak’s plans for reducing losses, 

and unless they take major corrective action we see them falling 

about $1.4 billion short of their projections between 2000 and 2004. 

Our biggest concern is that Amtrak’s business plan projects oper- ating self-sufficiency largely on the back of $737 million in undefined business actions. They are mostly unspecified reductions on 

the expense side, and actions of the magnitude necessary to fill 

those gaps do not translate into savings overnight. So we see a real 

urgency here. 

We also have some issues about Amtrak’s Northeast Corridor 

projections and on mail and express, but these are minor in comparison to the three quarters of a billion dollars in undefined management actions. 

A word about Acela delays. The delays in starting Acela Express 

will start affecting revenues in 2001, but it will not be severe if 

there are no further expected delays. The Acela service should be 

able to reach its full potential by 2003 if there are no further 

delays. 

A word on this, in fairness to Amtrak. Delays of this nature—

it is about a year, maybe a little longer depending on how you 

count—are not uncommon in complex programs of this type. This 

Committee has for years overseen the air traffic control modernization effort, and we know that a delay of a year there would sometimes be refreshing. 

Capital outlook. For years we and others, including my colleague 

Phyllis Scheinberg from GAO, have warned about serious capital 

7

shortfalls facing this railroad. These predictions have come true. In 

2001, assuming Amtrak’s cash losses are no higher than it projects, 

and that assumes that it will close about 20 percent of this three 

quarters of a billion dollar gap, Amtrak will face a minimum capital shortfall of over $90 million. 

In 2001, Amtrak is going to have to find an additional $385 million, or Amtrak is going to have no choice but to ignore some of 

its minimum needs, cancel key projects in progress, including ones 

that are important to its glide path, and defer on commitments to 

states for corridor development. I think this underscores how critical it is for Amtrak to close that three quarters of a billion dollar 

gap in its business plan, and quickly. It is also important for Amtrak to take care of its minimum capital needs first, such as operational reliability, before spending scarce capital on growth-related 

projects outside of minimum needs. 

I am not saying the spending on these growth-related projects is 

frivolous, but I am saying that the minimum needs ought to be 

taken care of first, and we have found a number of examples where 

that is not the case. 

Finally, S. 1900. We and the GAO have repeatedly cautioned 

that even if Amtrak attains operational self-sufficiency in 2003, it 

is going to require long-term capital funding. The Amtrak Reform 

and Accountability Act, Mr. Chairman, did not say whether Amtrak could count on long-term capital assistance from the federal 

government. Clearly, it is Congress’ role to determine the amount 

and the vehicle for providing federal capital support. 

Another question is when these decisions ought to be made: now, 

before Amtrak shows whether it will meet the requirements under 

the reform act, or at the end of the 5-year glide path, when you 

know one way or the other. Under the current version of this bill, Amtrak could sell $10 billion in high speed rail bonds over the next 10 years. Interest payments are to be made by taxpayers in the form of a tax credit to 

bond holders and repayment of principal is to be paid by the 

States, which will be financed by a 20-percent matching contribution by the States that will be placed in escrow. 

The House version would limit to 30 percent the amount that 

could go to any one corridor, and the bonding authority would be 

available to any intercity railroad, not just Amtrak. 

Now, I am here to tell you that S. 1900 would partially address 

Amtrak’s capital needs, but Amtrak’s total capital needs extend 

well beyond high-speed corridors. Even with S. 1900 the Committee 

should be aware that Amtrak will continue to need annual appropriations, most likely more than the $500 million or so that it currently receives. Until Amtrak develops a detailed 5-year plan for 

capital, its annual requirements cannot be estimated with any degree of precision. 

Also, as introduced, S. 1900 lacks sufficient oversight of Amtrak’s 

spending of the bond proceeds. The costs of developing high speed 

corridors are significant, and $1 billion each year will not be sufficient for Amtrak to meaningfully invest in every corridor seeking 

a piece of the pie. If funds are sprinkled around the country in 

amounts sufficient to get projects underway but insufficient to complete them, the likely results will be few of the routes will achieve 

8

expectations, to say nothing of the fiscal problems, and Mr. Chairman, the pressures to do this are going to be extraordinary. 

I have got in my hand a list of endorsements for S. 1900 from 

all over the country—people that are seeking corridors. Amtrak 

packaged this up and sent it over, and it really is amazing, the expectations from around the country. Everybody will not be able to 

eat part of that pie, and I think it is important that if we start 

projects, that we make sure that we have the funds available to 

complete them. 

The CHAIRMAN. How much money, do you think, just off the top 

of your head, is in all those letters? 

Mr. MEAD. I think probably twice the $10 billion, and I am sure 

that is conservative. In other words, the $10 billion is not going to 

come close to meeting all the demands from all over the country. 

The CHAIRMAN. How many promises have been made? 

Mr. MEAD. I am not privy to any promises that have been made. 

My point here is that federal oversight is critical, and we have been 

assured that adequate oversight provisions would be put in the bill. 

I think that is a very important point, otherwise we will have a lot 

of projects starting up, cropping up around the country, but you 

want to finish them, too. 

Finally, we have questions about how a 10-year authorization for 

high-speed rail bonds would interface with the mandate to achieve 

operating self-sufficiency by 2003. If Congress decides that S. 1900 

is the appropriate vehicle for addressing certain of Amtrak’s capital 

needs, we think continuation of that authority ought to be made 

explicitly contingent on Amtrak meeting its operating self-sufficiency mandate as prescribed by law. 

Now, I know there is concern about what happens if they miss 

it by $5 or $10 million, and I think you probably need a safety 

valve in there. If they come close I think the equation is much different, and they should be considered as meeting it, and so I am 

not talking about them being off by a few million dollars. I am talking about them missing it by magnitudes. 

That concludes my statement, sir. 

[The prepared statement of Mr. Mead follows:]

PREPARED STATEMENT OF HON. KENNETH M. MEAD, INSPECTOR GENERAL,

U.S. DEPARTMENT OF TRANSPORTATION

Mr. Chairman and Members of the Committee, 

We appreciate the opportunity to testify on Amtrak’s financial performance and 

requirements. Last winter when we testified on this subject, we stated that it would 

be possible for Amtrak to achieve operating self-sufficiency by 2003, but that delays 

in Acela Express would pose additional obstacles. Today, the picture is bleaker. 

Acela Express is still not in service and large holes exist in Amtrak’s business plan 

that will need to be filled in order for Amtrak to achieve operating self-sufficiency. 

On the plus side, Acela Express stands to benefit if aviation delays continue to 

plague the Northeast. However, time is running short, as are Amtrak’s available 

funds to invest in its equipment and infrastructure. Amtrak will face a $91 million 

minimum capital needs funding shortfall in 2001, or worse, if it does not hit its operating targets. 

With 3 years to go in its Congressionally-set mandate, we still believe it is possible for Amtrak to reach operating self-sufficiency, but this will depend heavily 

upon Amtrak’s ability to curb expense growth; in its 2001 business plan, fill the 

nearly three-quarters of a billion dollars in existing ‘‘undefined management acVerDate Apr 24 2002 09:19 Dec 10, 2003 Jkt 085968 PO 00000 Frm 00012 Fmt 6633 Sfmt 6621 S:\WPSHR\GPO\DOCS\85968.TXT SCOM1 PsN: CAROLT
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1Placeholders in Amtrak’s business plan that represent the difference between where Amtrak 

needs to be to achieve operating self-sufficiency and where it believes it will be based on the 

performance of already identified actions. 2 Report No. CR–2000–121, September 19, 2000. 2000 Assessment of Amtrak’s Financial Performance and Requirements, Office of Inspector General, U.S. Department of Transportation. 

3 Non-passenger revenues include mail and express, commuter, reimbursable, commercial development, non-transportation, state reimbursement, and other transportation revenues. 4 Ridership and on-time performance results were only available through June 2000. 

5 Amtrak’s reported operating revenue in 1999 and 1998 included, as required by generally 

accepted accounting principles, $191 million and $542 million, respectively, of federal payments 

received, including TRA funds, and $58 million in interest earnings on temporarily invested 

TRA funds. Because the TRA funds and the interest earnings will be spent on capital investment, they have been excluded from our reporting of operating revenue. 

tions’’1; and secure sufficient capital funding to support Amtrak’s projected ridership 

and revenue growth. 

We have just issued a report—the 2000 Assessment of Amtrak’s Financial Performance and Requirements 2—that summarizes our findings from our most recent 

Congressionally mandated annual review of Amtrak. Today, we would like to discuss the main points in this report by presenting our views on Amtrak’s financial 

status through the first 11 months of Fiscal Year 2000, the likelihood of Amtrak’s 

reaching operating self-sufficiency by 2003, the impact of Acela delays, and Amtrak’s capital funding needs. And as requested, I would also like to share some comments on the proposed bond bill, S. 1900, that is currently under consideration in 

the Senate. 

Amtrak’s Recent Financial and Performance Results 

Amtrak has shown financial improvement but greater efforts must concentrate on curtailing expense growth. The good news is that Amtrak’s revenue 

and ridership showed marked improvement in 1999 and through the first 11 months 

of 2000. The bad news is that expense growth has kept pace. If Amtrak is to reach 

operating self-sufficiency by 2003, it must aggressively pursue actions that curb the 

growth in expenses.

• Revenue and Ridership results are positive. The revenue growth that 

began in 1995 has brought Amtrak to the highest passenger revenue levels in 

its history and Amtrak expects that 2000 passenger revenues will exceed those 

of 1999. Passenger revenue grew by 5.7 percent in 1999 and in the first 11 

months of 2000, was up 8.6 percent over the same period in 1999. Overall operating revenues increased in 1999 by 7.4 percent, and were 11.7 percent higher 

in the first 11 months of 2000 than they were for the same period in 1999. Nonpassenger revenues showed a strong 9.7 percent growth in 1999 and in the first 

11 months of 2000, were almost 16 percent better than the same period last 

year.3 Ridership grew 2 percent over 1998 levels and in the first 9 months of 

2000, was up by 3.5 percent.4

Overall operating revenues increased in 1999 by 7.4 percent, from $1,708 million 

to $1,834 million,5 with non-passenger revenues showing a strong 9.7 percent 

growth, increasing from $707 million in 1998 to over $775 million in 1999. Non-passenger revenue constituted an increasing share of Amtrak’s total revenues between 

1990 and 1999. The overall increase in non-passenger revenue for the last 10 years 

has been 105 percent, going from $378 million in 1990 to almost $776 million in 

1999. Non-passenger activities now account for over 42 percent of Amtrak’s total operating revenues. 

10

Composition of Amtrak Revenues, 1990 Through 1999 ($ in millions)

• Although revenue and ridership trends are positive, increases in labor costs, depreciation, and train operation expenses have fueled continued growth in operating expenses, increasing by 6.9 percent in 1999 and by 7.3 percent in the first 

9 months of 2000. Additionally, Amtrak has funded most of its recent refleeting 

efforts through external financing, which caused interest expenses to grow rapidly in the 1990’s. The interest costs on this financing are adding about $100 

million more to cash losses per year between 2000 and 2004 than in the 5-year 

period before these programs. Principal payments on debt, which are considered 

capital costs, are also projected to grow steadily between 2000 and 2004.

This expense growth has kept Amtrak’s cash loss from declining. Amtrak’s cash 

loss in 1999 of $579 million was Amtrak’s highest in 10 years. Although we project 

the cash loss in 2000 will be $521 million, the lowest since 1992, Amtrak must make 

significantly more progress each year if it is to reach its goal of operating self-sufficiency in 2003. Amtrak must reduce its cash loss to $266 million in 2003 to meet 

this goal, a required improvement of $255 million over 2000. Reducing the cash loss 

will depend heavily on limiting the growth in Amtrak’s expenses over the next 3 

years. 

The ridership and passenger revenue growth has occurred in the face of little 

change in either Amtrak’s Customer Satisfaction Index or its on-time performance. 

In 1999, the Index decreased to 83 from 85 in 1998, and has rebounded to 85 for 

the first 9 months of 2000. On-time performance was constant at 79 percent in 1998 


926mea1.eps 926mea2.eps
11

and 1999, and has risen slightly to 80 percent for the first 9 months of 2000. Both 

on-time performance and customer satisfaction have been affected by the service 

problems experienced by the freight railroads over the last 3 years. 

To further bolster ridership, passenger retention, and revenue, Amtrak instituted 

a Customer Service Guarantee on July 4, 2000. The guarantee provides passengers 

who are not satisfied with Amtrak’s service, for any reason, with vouchers for future 

travel equal to the value of the trip on which they were dissatisfied. Amtrak’s goal 

for the Customer Service Guarantee is that no more than 1 passenger in 1,000 (a 

99.9 percent satisfaction rate) will request a voucher. The issuance rate for July was 

about 2.8 per 1,000 passengers (99.7) and the estimate for August is about 5 per 

1,000 passengers (99.5). 

Amtrak’s Future Financial Outlook 

Amtrak will need to take major corrective actions if it is to achieve operating self-sufficiency in 2003. Despite positive trends in revenue and Amtrak’s 

financial results being close to goals over the last 2 years, starting next year, the 

bar will be raised much higher. Amtrak’s cash losses must drop by an average of 

$85 million per year to reach operating self-sufficiency in 2003. 

Our assessment of Amtrak’s business plan identified a number of elements that 

are unlikely to perform as Amtrak expects. If no corrective action were taken to compensate for them, Amtrak’s cash loss would be about $1.4 billion more than it 

projects over the 5-year period, 2000 through 2004. Most critically, we project that 

in 2003, the year of operational self-sufficiency, Amtrak would still require $351 million more in operating assistance than it can fund with its federal appropriation. 

About 85 percent of the total $1.4 billion at risk of not being achieved is concentrated in 3 elements of the Plan: $737 million in undefined management actions, 

$304 million in Northeast Corridor passenger revenues, and $179 million in Mail 

and Express net revenues. I would like to say a few words about each of these areas.

• Undefined Management Actions. Amtrak’s business plan projects operating 

self-sufficiency largely on the back of the $737 million in undefined management actions. In essence, these undefined actions represent the gap between the 

total cash loss improvements Amtrak needs and what it expects to get from actions it has already identified. If Amtrak’s 2001 business plan does not fully define these management actions, we strongly doubt that Amtrak will be able to 

achieve its mandate by 2003. Actions of the magnitude necessary to fill these 

gaps do not translate into revenues or savings overnight.

• Northeast Corridor Passenger Revenues. We are concerned that Amtrak’s 

projections for Acela Express ridership assume a higher-than-likely diversion of 

passengers from air and automobile, and an underestimation of ridership on the 

slightly slower, but significantly less expensive Acela Regional service. However, 

if Amtrak were to make some fare and service adjustments, and if aviation 

delays continue to plague the Northeast Corridor, we believe that a significant 

share of the benefits we have questioned would indeed be forthcoming.

• Mail and Express. In our opinion, the Mail and Express service is not likely 

to ramp up as quickly as Amtrak projects; however, by 2004, our projections 

come close to Amtrak’s. Agreements with freight railroads for permission to operate trains with consists greater than 30 cars is essential to the growth of Mail 

and Express capacity. According to Amtrak, most of the freight railroads have 

expressed a willingness to enter into such negotiations.

The bottom line is that if our projected losses were to occur, the situation would 

be untenable for Amtrak. In 2001 and 2002, Amtrak would have to cover the greater 

losses through its federal appropriation, leaving virtually no funds for capital investment. Amtrak must take major corrective actions now.

Acela Delays 

Acela Delays Will Impact Revenue but Delays are Understandable in New 

Technology Investments. The delays in the introduction of Acela Express and 

Acela Regional service will reduce Amtrak’s 2001 revenue below Amtrak’s earlier 

projections. This will put additional pressure on Amtrak to reduce expenses and fortify its efforts to improve performance in both its passenger and non-passenger services, including Mail and Express. However, the approximately 1-year delay should 

not be surprising for a program of this nature. The testing and introduction schedules were ambitious, in part, because of the dire need for Amtrak to generate as 

much new revenue as quickly as possible in order to meet its self-sufficiency deadline. 

12

6Our definition of minimum needs includes only the capital investment necessary to maintain 

Amtrak’s infrastructure and assets in a steady state through 2003. Thereafter, the condition of 

Amtrak’s infrastructure and assets will begin to steadily decline. 

Amtrak’s 2000 Strategic Business Plan incorporated the revenue and expense impacts of delays until July 2000, which was the anticipated start-up date when the 

Plan was issued in January. The revised plan for starting operations in October 

2000 will result in some additional revenue loss in 2000 (which is reflected in our 

assessment) and in 2001. While delays of this magnitude will pose a financial challenge to Amtrak in 2001, if there are no further extended delays, the Acela service 

should be able to reach its full operating and revenue potential in 2003. 

Although the Acela delays have affected Amtrak’s revenue projections and path 

toward self-sufficiency, delays of this nature are not uncommon in programs of this 

complexity. In fact, in other industries projects with delays of this length might actually be considered ahead of schedule. The new trainsets represent a significant adaptation of existing high-speed designs to meet more stringent safety requirements 

in the United States and to compensate for the unique track configurations on the 

Northeast Corridor. Problems identified in testing and design modifications are normal consequences of such new technology development programs. 

Capital Needs 

Amtrak’s capital outlook is grave. In both our prior assessments, we projected 

that Amtrak would face serious capital shortfalls beginning in 2001. Our predictions 

have come true. In 2001, assuming Amtrak’s cash losses are no higher than it 

projects, Amtrak will face a minimum needs capital funding shortfall of $91 million, 

and continued shortfalls through 2004 totaling $298 million.6

Amtrak’s Projected Minimum Capital Needs Funding Shortfall, 2000 

Through 2004 ($ in millions)

Amtrak will be faced with some very difficult choices next year concerning how 

to best use its limited capital dollars. After covering its mandatory capital costs, 

Amtrak will have only $179 million left to invest in its capital program. Competing 

for these funds would be remaining minimum needs, key projects in progress—including many projects that support the self-sufficiency glidepath, and commitments 

to States for corridor development projects. Amtrak would need at least an additional $385 million in capital funding in 2001 if it were to cover all of these costs. 

If our projections for cash losses in 2001 were to occur, Amtrak’s capital position 

would be far more serious. Amtrak would need to use $310 million more than 

planned of its federal appropriation to cover the losses, leaving only $29 million 

available for capital investment, which is not even enough to cover Amtrak’s debt 

obligations in 2001. This outcome is not inevitable, but it underscores how critical 


926mea3.eps
13

it is for Amtrak to fill the gap in its business plan for undefined management actions. 

Growth-focused capital spending starves minimum needs and could ultimately undermine the benefits of key investments like high-speed rail. Despite known minimum-needs shortfalls, Amtrak has pursued a growth-focused capital program. In our 1999 assessment, we recommended that Amtrak set aside funds 

to meet minimum needs in 2001 and 2002 by revising its spending plans for 2000. 

Although Amtrak agreed with our predictions, its 2000 Plan provided for continued investment in projects outside of minimum needs. For example, Amtrak invested $25 million in planning efforts for the Midwest Regional Rail Initiative, $15 

million in infrastructure improvements to support the future Las Vegas service, and 

$9 million for the refurbishment of Heritage diner cars. Amtrak’s spending strategy 

reflects its belief that these projects are necessary to achieve the business plan goals 

and ultimately self-sufficiency by 2003. We agree that these projects are important 

to Amtrak’s financial growth, but do not believe they should be funded at the expense of the minimum investments necessary to maintain the reliable operation of 

the railroad. 

In addition to spending on non-minimum needs, Amtrak also underspent on certain minimum needs in 1999 and 2000 to support a higher level of growth-related 

capital spending. This is most true for projects that support the operational reliability of Amtrak’s services. Projects in this category include replacing old tracks, 

resurfacing rails, and replacing worn out electric traction catenary wire and 

insulators. We estimate Amtrak’s minimum operational reliability needs to be $135 

million each year. Amtrak’s annual spending on operational reliability projects in 

the past 3 years has averaged only $71 million. 

If Amtrak continues to defer spending on operational reliability, service quality 

will suffer and its goals for revenue growth may not be met. In order for high-speed 

rail to be successful, Amtrak acknowledges that it must provide superior service and 

on-time performance. If it cannot maintain that level of service, ridership and revenue will begin to erode. 

Funding Amtrak’s Capital Requirements 

In February of this year, we testified before the Subcommittee on Surface Transportation and Merchant Marine on several Amtrak issues, including the question of 

capital funding for Amtrak beyond 2002. Although precluding use of federal funds 

for most operating expenses after 2002, the Amtrak Reform and Accountability Act 

did not say whether Amtrak could count on receiving any long-term federal subsidies for capital investment. 

At that hearing, we stated that even if Amtrak meets its operating self-sufficiency 

mandate in 2003, it would not make it by much, clearly not enough to cover its minimum capital requirements. Our position then, as it is now, is that without significant capital funding to cover such costs as debt, safety improvements, infrastructure 

reinvestment, and equipment renewal, Amtrak will not be able to continue to operate the railroad. We do not see this situation changing—it will not be feasible in 

the foreseeable future for Amtrak to progress to a point where it can generate sufficient internal revenue to cover its capital costs. 

If Amtrak is to continue operating a national rail passenger network, Amtrak will 

require significant long-term capital funding—in amounts well above the annual operating subsidy of which it is supposed to be largely free in 2003. At that point, the 

central questions would not be whether Amtrak would receive a capital subsidy, but 

rather (1) what the funding vehicle would be (direct appropriations, contract authority, tax subsidy, etc.), (2) in what amounts, and (3) for what purposes. Another question is when these decisions should be made—now, before Amtrak shows whether 

it will meet the requirements of the Amtrak Reform and Accountability Act, or in 

2003, at the end of the 5-year glidepath. 

S. 1900. Clearly, it is the Congress’ role to determine the need, the amount, and 

the vehicle for providing federal capital support. However, at your request, we have 

several observations on S. 1900, the High Speed Rail Investment Act. 

In addition to Amtrak funding policy, S. 1900 is a question of tax policy. Under 

the current version of the bill, the legislation, if enacted, would enable Amtrak to 

sell $10 billion in high-speed rail bonds over the next 10 years. Interest payments 

would be made by taxpayers in the form of a tax credit to bondholders and repayment of principal would be secured by a 20 percent matching contribution by the 

States that would be placed in escrow. The House version (H.R. 3700) would limit 

to 30 percent the amount of total funding that could go to any one corridor and 

would make the bonding authority available to any intercity passenger railroad, not 

just Amtrak. 

14

These proposals are clearly attractive to Amtrak. S. 1900 would address part of 

the difficulty in securing additional appropriated funds for Amtrak capital investment. However, Amtrak’s capital needs extend well beyond high-speed corridors and 

because S. 1900 is limited to high-speed corridors, Amtrak will continue to need annual appropriations. These appropriations will be necessary to cover capital costs 

such as repayment of debt, information technology projects, environmental remediation, and approximately $200 million each year in overhauls and rolling stock improvements. 

Until Amtrak develops a detailed, 5-year capital program, the annual requirements can not be estimated with precision. We recommended that Amtrak develop 

such a plan in our recent Amtrak financial assessment. However, even if S. 1900 

or some version of the bill is passed, Amtrak is still likely to need more per year 

than the current Amtrak capital funding of $521 million. 

Federal oversight requirements. As introduced, S. 1900 lacked sufficient federal oversight of Amtrak’s spending of the bond proceeds. Essentially, the tax credit 

vehicle bypasses the oversight that would otherwise be in place through the annual 

appropriation process. 

Costs of developing high-speed corridors are significant and $1 billion each year 

will not be sufficient for Amtrak to meaningfully invest in every corridor seeking 

a piece of the pie. Amtrak will need to make choices on where and how much to 

invest in each project. If funds are sprinkled around the country in amounts sufficient to get projects underway but insufficient to complete them, the likely result 

would be that few of the routes would make positive contributions to Amtrak’s 

achieving or maintaining operating self-sufficiency. 

The intent of S. 1900 is to provide Amtrak a vehicle to make investments that 

will not only help it maintain self-sufficiency, but potentially begin generating internal funds for capital investment. Federal oversight will be critical to ensure that 

Amtrak’s investments meet those criteria. Without such oversight, passage of this 

or any similar bill would be tantamount to writing Amtrak a blank check. We have 

been advised that adequate oversight provisions have or will be included in the bill 

language; however, we have not seen the provisions of the marked-up bill and cannot comment on their adequacy. 

S. 1900 and Amtrak’s Glidepath. Finally, we have questions about how a 10-

year authorization for high-speed rail bonds would interface with the provisions of 

the Amtrak Reform and Accountability Act, which requires Amtrak to reach operating self-sufficiency in 2003. Our most recent report finds that without major corrective action to curtail expense growth and fill unspecified revenue increases and 

expense savings totaling more than $700 million, Amtrak will not achieve this mandate. Although S. 1900 will not change how we measure operating self-sufficiency, 

it also will not fill this gap. If Congress decides that S. 1900 is an appropriate vehicle for addressing Amtrak’s capital requirements in the northeast and other high 

speed corridors, we believe continuation of any such authority be made contingent 

on Amtrak meeting its operating self-sufficiency mandate as prescribed by law. 

This concludes our statement. I would be pleased to answer any questions.

The CHAIRMAN. Thank you very much, Mr. Mead. We appreciate 

all you have done. 

Senator Allard, we welcome you. I know you were delayed and 

had requested to make a statement before the Committee. 

STATEMENT OF HON. WAYNE ALLARD,

U.S. SENATOR FROM COLORADO 

Senator ALLARD. Mr. Chairman, I want to thank you for your 

willingness to accommodate my schedule this morning. I know you 

are under a deadline, too. I had to testify at 9:30 before another 

Committee, and then I have my own hearing at 10:30, and we have 

got votes, I think, at 10:15, and we may have to shut these Committees down at 11:30 if the Senate two-hour rule is invoked, so 

I appreciate you allowing me to move in and give this testimony. 

Mr. Chairman, again I want to thank you for inviting me here 

today to share my comments with the Commerce Committee regarding the Senate Banking Committee’s experience with Amtrak. 

I regret that I cannot stay to hear the testimony from your other 

15

witnesses, but I have to chair a hearing, as I mentioned earlier, at 

10:30. 

As you are aware, I serve on the Committee on Banking, Housing and Urban Affairs as Chairman of the Subcommittee on Housing and Transportation. In my capacity as Chairman of the Subcommittee with jurisdiction over the federal mass transit program 

which includes certain parts of the commuter rail, I have had opportunities to interact with Amtrak management and personally 

follow the business practices employed by Amtrak, and it is disappointing to me that although the taxpayers provide Amtrak almost $600 million in direct subsidies annually it does not operate 

in the best interest of the American people, nor do the subsidies 

stop at $600 million, as a recent hearing before my Subcommittee 

has demonstrated. 

On April 25 and July 11 of this year the Committee and Subcommittee held hearings which exposed questionable activities by 

Amtrak involving a commuter rail contract it holds in Boston with 

the Massachusetts Bay Transportation Authority, or what we refer 

to frequently as MBTA. 

At the urging of the Federal Transit Administration, the MBTA 

put out a request for bids for the provision of commuter rail service 

in accordance with federal procurement law, which requires competitive bidding. Four bids were received, and were subjected to an 

objective and thorough cost and work quality analysis. Of the bids 

submitted, Amtrak ranked fourth out of the 4 bids, last. 

The winning bidder, Bay State Transit Services, won the competitive bidding process in both categories, submitting a bid at 

$116 million less than Amtrak, and I have this chart behind me, 

which shows the analysis of these various contracts, and you can 

see, here is Amtrak’s bid, and we have got Bay State, Mass Rail, 

and Bombardier. There are 4 bidders in there. This demonstrates 

these contract and bid prices. 

Amtrak’s management and work force, however, prevented implementation of the Bay State contract. Current Amtrak workers 

refused to apply for employment which Bay State offered as required by federal law. Amtrak management and the unions representing the workers created a hostile work environment, intimidated Bay State employees, and threatened unfounded lawsuits, all 

to ensure that Amtrak retained the lucrative MBTA contract. 

Faced with the potential for what amounted to a strike which 

could have stranded 60,000 Boston commuters, the Federal Transit 

Administration reluctantly approved a 3-year extension of the commuter rail contract for Amtrak. Amtrak, the same bidder that offered the lowest quality service at the highest price. I repeat, Mr. 

Chairman. Its bid, as analyzed, showed it was the lowest quality 

service at the highest price. Further, Amtrak adopted an all-ornothing position and refused to provide service for the MBTA during the transition period of the Bay State contract implementation, 

and unfortunately the cost to the taxpayer for Amtrak continuing 

to provide service for the 3-year extension is far greater than the 

Bay State offer. 

Mr. Chairman, I respectfully request that an article from the 

Boston Herald dated July 13, 2000 regarding the Banking Committee’s hearing on this matter be entered as a part of the record. 

16

The CHAIRMAN. Without objection. 

[The information referred to follows:]

The Boston Herald

July 13, 2000

TRUTH ABOUT THE T TOLD BY STRANGERS

It took U.S. senators from Texas and Colorado to stand up for the rights of Bay 

State taxpayers and rail commuters this week. 

Boy, there’s something wrong with that picture! 

Sens. Wayne Allard (R-Colo.) and Phil Gramm (R-Texas) used a congressional 

hearing to give federal officials what-for over approving Amtrak’s 3-year extension 

of its maintenance contract for the MBTA commuter rail system. The T had put the 

contract out to competitive bid and the winner, Bay State Transit, promised to save 

the system—and that really means taxpayers—$116 million over 5 years. 

But Amtrak’s unions would not be moved. Workers refused to apply for jobs with 

the new company. Then the U.S. Department of Labor, at the urging of some members of the Massachusetts congressional delegation who were themselves taking orders from the unions, decided to play hardball with the MBTA. 

Caught between the proverbial rock and a hard place, the Cellucci administration 

and the MBTA caved in and extended the Amtrak contract. 

Gramm had it about right when he noted at the hearing that ‘‘the Labor Department is a wholly owned subsidiary of the AFL–CIO.’’ He added that the costly Amtrak contract extension was ‘‘one of the most extraordinary things I have seen.’’

And that it surely is. Bay State taxpayers and commuters have been taken for 

a ride again and the Clinton Labor Department and members of our own congressional delegation—including Sen. John Kerry, who appeared at the hearing to defend the utterly indefensible deal—share in the blame. 

At least a handful of folks in Washington have the guts to point out the obvious 

truth.

Senator ALLARD. The result of this contract is double jeopardy for 

Amtrak, the enormous subsidy provided by this contract on top of 

the almost $600 million annually that the Congress appropriates, 

and this is only one example. I have received accounts of similar 

situations where Amtrak has used its unique position as a federally 

subsidized entity and its existing political support to exercise an 

unfair advantage in the marketplace. 

I struggle with how I can explain to the taxpayers of Colorado 

why the federal government feels it is acceptable to squander their 

resources by giving Amtrak a free ride at the expense of commuters 

everywhere. 

Both full Committee chairman Phil Gramm and I have serious 

concerns about pending legislation that will give Amtrak yet another source of taxpayer resources. Senate bill 1900, the HighSpeed Rail Investment Act, would allow Amtrak to issue $10 million in tax-free bonds to fund high-speed rail. This legislation proposes giving Amtrak yet another opportunity to secure federal subsidies, albeit tax subsidies. 

With your concurrence, Mr. Chairman, I would like to enter into 

the record a copy of the Heritage Foundation’s Backgrounder on 

Senate bill 1900, called Senate Boondoggle May Outdo All Others. 

This is not something I would be comfortable supporting, since Amtrak seems incapable of operating like a real business, or even competing fairly in the free market. 

Mr. Chairman, thank you for holding this important hearing and 

giving me the opportunity to share my views with the Committee. 

I am sorry I will not be able to answer any questions. My Subcommittee hearing begins shortly, and we vote shortly, too. 

17

1 U.S. General Accounting Office, Intercity Passenger Rail: Amtrak Will Continue to Have Difficulty Controlling Its Costs and Meeting Capital Needs, GAO/RCED–00–138, May 2000, p. 3. 2The bill calls this the ‘‘credit rate.’’ 3GAO, Intercity Passenger Rail: Amtrak Will Continue to Have Difficulty Controlling Its Costs 

and Meeting Capital Needs, p. 3. 4 U.S. Department of Transportation, Office of the Inspector General, Semi-Annual Report to 

the Congress, April 1, 1999–September 31, 1999, p. 21. 5 National Railroad Passenger Corporation, 1999 Annual Report, p. 41. On an operating basis, 

1999’s loss was the highest ever because 1998’s loss included one-time costs associated with a 

labor settlement. 6 Joseph Vranich, ‘‘Resignation from the Amtrak Reform Council,’’ letter to Senator Trent Lott, 

July 10, 2000. 

[The information referred to follows:]

NEW AMTRAK BOONDOGGLE MAY OUTDO ALL OTHERS

by Dr. Ronald D. Utt 

Backgrounder No. 1392 

August 28, 2000

Legislation now before Congress proposes to dedicate as much as $16 billion of 

future budget surpluses to prop up Amtrak, America’s federally chartered and subsidized passenger rail service. Members of Congress should view this new proposal 

with skepticism given Amtrak’s record-breaking losses, stagnant ridership, and persistent failure to implement high-speed rail service, promised for 1997 and now delayed for a third straight year. 

Instead, Congress should exercise its oversight responsibility to investigate the 

system’s future viability. It should also weigh the value received from the $23 billion 

in direct federal subsidies—including $3.6 billion over just the past 3 years1—that 

U.S. taxpayers already have poured into the system merely to keep it afloat. 

The High Speed Rail Investment Act (S.1900, H.R. 3700), introduced by Senator 

Frank R. Lautenberg (D–NJ) and Representative Amo Houghton, Jr. (R–NY), would 

allow Amtrak to borrow as much as $10 billion in interest-free loans over the next 

10 years. Although Amtrak would pay no interest, lenders would still earn the 

equivalent of interest on the loans through a federal tax credit equal to the interest 

paid on long-term corporate bonds.2 Currently, this rate is about 8 percent per 

annum. In effect, the U.S. Treasury would pay the interest to the bondholders on 

behalf of Amtrak. 

These implicit interest payments by the federal government could add up to as 

much as $16 billion over the life of the bonds. For example, at an 8 percent interest 

rate, an individual investor holding a $1,000 Amtrak bond would be entitled to an 

$80 tax credit each year the bond is held. This means that if the investor owed 

$10,000 in federal income taxes in a given year, the $1,000 Amtrak bond would reduce his or her tax obligation to $9,920. The bill authorizes the issuance of $10 billion worth of these bonds at maturities of up to 20 years. The loss of tax revenues 

to the U.S. Treasury would total $16 billion if interest rates remained unchanged 

at 8 percent. 

Renewed congressional efforts to bail out Amtrak are a striking turnaround from 

commitments made just a few years ago. In 1994, Amtrak promised to improve its 

operations and performance so that it could eliminate the need for federal subsidies 

by 2002.3 In 1997, Congress confirmed that commitment when it passed the Amtrak 

Reform and Accountability Act (PL 105–134), which among other provisions established the Amtrak Reform Council, whose responsibility was to notify Congress and 

the President in the event Amtrak failed to meet its financial goals. 

Currently, however, Amtrak is not meeting its goals; instead, its operating losses 

are escalating from year to year. Doubts about Amtrak’s ability to meet its financial 

objectives are shared by the Department of Transportation’s Inspector General, who 

observed in a recent report to Congress that meeting the goal of self-sufficiency by 

2003 will be ‘‘difficult.’’ 4

Not only is Amtrak failing to meet its promise and statutory requirement to break 

even financially by 2002, but its financial situation has worsened. Amtrak’s annual 

operating loss rose from $833 million in 1994 to a record $930 million in 1998. Its 

loss for 1999 was $916 million,5 and losses for the first half of fiscal year (FY) 2000 

are reported to be higher than those during the same period in 1999.6

Furthermore, these losses have ballooned despite a booming economy that has 

sent Americans traveling in record numbers and caused business profits to soar. 

18

7 Air Transport Association of America, Inc., ‘‘Traffic Summary 1960–1999: U.S. Scheduled 

Airlines,’’ at www.air-transport.org/public/industry/24.asp, August 2000. 8 Eno Transportation Foundation, Transportation in America 1999, 2000, p. 47. 9 Ibid., p. 48. 10 Ibid., p. 47. 11 National Railroad Passenger Corporation, 1999 Annual Report, p. 43. 12 U.S. General Accounting Office, Intercity Passenger Rail: Financial Performance of Amtrak’s 

Routes, GAO/RCED–98–151, May 1998, pp. 6–7. 13Don Phillips, ‘‘Amtrak Testing of High-Speed Electric Train Is Delayed Again,’’ The Washington Post, July 22, 2000, p. A11. 

This suggests that Amtrak’s management and strategic plan are not up to the task 

of meeting the FY 2002 financial objectives. 

Losses Amid Rising Prosperity 

The rising prosperity of the 1990s has led to unprecedented mobility and travel 

opportunities for all Americans, and this in turn has benefited almost all segments 

of the transportation industry. Between 1990 and 1999, the number of domestic airline passengers rose by 37 percent, from 423 million at the beginning of the decade 

to 582 million last year.7 Automobile use as measured by passenger-miles increased 

by 25 percent from 1990 to 1998.8

Even intercity bus service, Amtrak’s closest competitor, saw its passenger volume 

rise by 7 percent between 1990 and 1998.9 Indeed, intercity bus service currently 

carries 17 times more passengers than Amtrak, and Amtrak’s share of the intercity 

passenger market amounts to only six-tenths of 1 percent nationwide when measured in passenger-miles.10

In contrast to its competitors’ success, Amtrak was one of the rare American businesses that bucked the trend toward increased customers and soaring profits in the 

past decade. According to the railroad’s most recent annual report, Amtrak’s annual 

passenger level fell from 22.2 million passengers in 1990 to 21.5 million last year,11

and its operating loss widened from $704 million to $916 million over the same interval. 

Acela to the Rescue? 

As it has done so many times before, the railroad’s management has responded 

to failure by promising to do better next year—if only Congress will give Amtrak 

more money now. Amtrak’s 1994 commitment to break even by 2002 was the most 

recent of these promises. 

Recognizing that a history of broken promises is becoming tiresome to some in 

Congress, Amtrak has resorted to a clever new public relations tactic. It now proposes to implement a profitable, high-speed rail service called the Acela. Amtrak 

maintains that the Acela will be so profitable that it will make Amtrak financially 

self-sufficient and independent of future federal subsidies. The $10 billion loan proposal, under this scenario, would be America’s down payment on this promise. 

The promise, however, is not likely to be fulfilled. Amtrak has never made a real 

profit on any of its existing lines, and there is no reason to expect that this 30-year 

record of disappointment is about to end. For example, one of Amtrak’s particularly 

costly lines is the Cardinal route, running between Chicago and Washington, D.C., 

via West Virginia, which incurs $3.29 of cost for every dollar of earned revenue. 

Overall, according to the U.S. General Accounting Office (GAO), Amtrak incurs costs 

of $1.86 for each dollar of revenue it receives.12

Even Amtrak’s contention that it makes a small profit on its Metroliner service 

in the Northeast Corridor is true only under Amtrak’s less-than-complete accounting 

standards. To declare the Metroliner profitable, Amtrak must neglect the capital 

costs associated with road bed, rolling stock, engines, buildings, and signal systems. 

While the perennial optimist could argue that Amtrak might improve its operations, Amtrak’s high-speed rail performance to date suggests that the Acela program will not be the catalyst. Service was scheduled to begin in 1997, but a series 

of design, mechanical, and testing problems have delayed the opening, and a new 

date has not been set for Acela’s debut.13

Assuming that the high-speed line ultimately does open, its anticipated profitability depends upon substantially increased ridership. The increased ridership figures, however, may be overly optimistic. Taking the Acela rather than the 

Metroliner on the route where it would work best—between New York and Washington—would save a traveler only 15 minutes, reducing the trip from 3 hours to 

2 hours and 45 minutes. While this represents some improvement, the change is not 

likely to convince passengers to abandon cars or planes. 

19

14 National Railroad Passenger Corporation, ‘‘Acela Questions & Answers,’’ at www.acela.com/

questions/index.htm, August 2000. In reality, the diminished time for the Boston-New York run 

is closer to an hour, not the 90 minutes claimed. Amtrak has already reduced the time on the 

run by 30 minutes by eliminating the engine change in New Haven, Connecticut, now that the 

line from New Haven to Boston has been electrified. 15 U.S. General Accounting Office, Intercity Passenger Rail: Issues Associated With a Possible 

Amtrak Liquidation, GAO/RCED–98–60, March 1998, p. 2. 16For additional details on the success of transit privatization worldwide, see Ronald D. Utt, 

‘‘Congress Should Accept Industry Offers to Buy Amtrak,’’ Heritage Foundation Backgrounder

No. 1179, May 18, 1998

On the Boston to New York run, Amtrak projects the Acela will reduce train 

times from 4 hours and 30 minutes to 3 hours.14 This is a significant improvement, 

but it is still substantially longer than flying. The same trip on a scheduled airline 

is currently only one hour and 20 minutes. 

The Potential for Blackmail 

Perhaps the most troublesome aspect of the proposed $10 billion federally subsidized loan is not its projected taxpayer cost of $16 billion. While worrisome, the 

cost is eclipsed by the potential for even greater taxpayer costs as a result of the 

opportunities for fiscal blackmail that a debt of that magnitude would create. If the 

federal government decided to end its funding of Amtrak at some point, it might 

feel bound to assume the costs of the loan. If Amtrak were to add the cost of the 

loan to the cost of its liquidation, it would have leverage with which to argue 

against such a liquidation. 

In past efforts to prolong the life of a failing Amtrak, supporters argued that the 

government’s liquidation cost if it were to allow Amtrak to go bankrupt would vastly 

exceed the subsidies necessary to achieve Amtrak’s financial independence. In 1997, 

for example, Amtrak claimed that the costs associated with its liquidation could be 

as high as $10 billion to $14 billion. Congress asked the General Accounting Office 

to confirm this,15 but the GAO was unable to estimate Amtrak’s likely liquidation 

costs with confidence. 

However, if Congress passes the High Speed Rail Investment Act, it might feel 

obliged to incur the cost of the $10 billion in federally subsidized bonds; this would 

be in addition to the other costs that it could incur if it chose to liquidate Amtrak. 

Although the legislation would not grant the government’s full faith and credit to 

the special Amtrak tax credit bonds, the government would have a moral obligation 

to reimburse those who invest in these bonds. Because the government created, subsidizes, and directs Amtrak, it would be expected to shoulder the responsibility of 

making good on the loan if Amtrak were to fail. 

And Amtrak would make the most of this obligation. If it fails to break even in 

2002 as it has promised, it no doubt will use the obligation as leverage to seek ever 

more costly bailouts. 

Subsidizing the Last Choice in Travel 

Notwithstanding Congress’s long-standing obsession with socialized rail passenger 

service and its $23 billion investment in Amtrak, intercity travelers continue to 

shun Amtrak in favor of alternate modes of transport. For this reason, the High 

Speed Rail Act represents an exceptionally costly bailout of an enterprise that has 

failed to provide cost-effective service during its 30 years of operation. 

When Congress passed the Amtrak Reform and Accountability Act in 1997, it 

gave the Amtrak Reform Council the responsibility to assess Amtrak’s progress toward financial independence by 2002. If that goal is not met, the Council will have 

to determine whether Amtrak should be restructured or liquidated. Congress should 

make no additional financial commitments to Amtrak until the council submits its 

report and recommendations and Congress reviews them. 

In the meantime, Congress should study the growing number of privatization reforms that have been applied successfully to government-operated passenger rail 

service in other countries, including Great Britain and Japan.16 Given Amtrak’s 

long history of failed schemes and operating losses, such innovations—not $10 billion for an unproven high-speed rail program—are the only way Amtrak will improve its own operations. 

—Ronald D. Utt, Ph.D. is Senior Research Fellow in the Thomas A. Roe Institute 

for Economic Policy Studies at The Heritage Foundation.

The CHAIRMAN. Thank you, Senator Allard. Welcome, Governor 

Thompson. 

20

STATEMENT OF GOVERNOR TOMMY THOMPSON, CHAIRMAN 

OF THE AMTRAK REFORM BOARD, ACCOMPANIED BY 

GEORGE WARRINGTON, PRESIDENT, NATIONAL RAILROAD 

PASSENGER CORPORATION 

Governor Thompson. Thanks, Mr. Chairman. First, to answer 

your question, there have been no commitments at all on any 

money that may be coming in the future. 

Members of the Committee, I want to thank you for inviting me 

to testify today. I believe it is important to keep in mind that our 

goal should be to create a seamless transportation network that offers all Americans the widest array of travel choices possible. As 

a Nation, we recognize the importance of funding our highways. We 

spend $32 billion a year, and yet our roads are more congested 

than ever, reducing the quality of life for our citizens and costing 

businesses untold dollars in lost productivity. The federal government will spend $14 billion this year on aviation projects, yet as this Committee well knows airline passengers 

are facing longer delays and are increasingly frustrated with the 

airline industry. 

At the same time the federal government subsidizes mass transit by $6 billion it gives $521 million only to Amtrak, about one-half 

of what the authorizers indicated that we should have. We spent 

$23 billion on passenger rail, but that was over 29 years, averaging 

about $1⁄2 billion a year. 

However, I believe as you do, Mr. Chairman, that the way for 

Amtrak to succeed is not through more subsidies, but through innovation, market-based reforms. I am here to tell you that Amtrak 

will meet its goal of operational self-sufficiency by 2003 by doing 

just that. We are making great strides already. Let me give you a 

few examples. 

On July 4, 2000, Amtrak launched its new service guarantee, the 

only transportation mode that does it. This guarantee and the improved service are designed to increase repeat business. Amtrak 

has an unprecedented agreement with Continental Airlines to connect their customers to our stations in the Northeast. 

Amtrak’s partnership with the freight railroads have already 

helped grow our mail and express business by 30 percent over last 

year, 30 percent, and we are only just beginning to explore this 

profitable relationship. Our network growth strategy will expand 

rail service in 21 States, further grow our mail and express business and generate $255 million in improvements to our bottom line 

by 2003. 

While some have criticized Amtrak, saying we expanded service 

for political gain, but the truth be told we are doing it to make 

money, simply, pure and simple. Amtrak’s partnership with States 

to build regional high-speed rail corridors will have a profound impact on our financial situation, as well as on America’s transportation system. On January 31, 2000, Amtrak launched Acela regional train service between Boston and New York, which has increased ridership by 42 percent, and our profits by 70 percent. 

Mr. Chairman, the business initiatives I described are already 

producing results. Amtrak continues to break ridership and revenue records. A 21-year high of nearly 2.1 million passengers rode 

Amtrak in August, leading to an all-time monthly ticket revenue 

21

record of $108 million in 1 month, and with only a few days left 

in this fiscal year, Amtrak is on course to set a record for annual 

ticket revenues and to break its all-time annual ridership record of 

22 million passengers. 

The strong financial performance of our company assures us that 

with continued federal capital support Amtrak will meet its business plan target of operating self-sufficiency by 2003. To date, Amtrak has met its annual target on the glide path to ending federal 

operating assistance. We will require no more than the planned 

$362 million in federal support for operating expenses this year, 

$122 million less than we did last year. 

Amtrak does face, however, some real challenges if it is going to 

succeed. The first is without a doubt the delay in launching the 

Acela Express, which created revenue shortfall for us this year of 

$150 million, and I want you to know we will be receiving our first 

Acela Express within the next several days, but our strong performance this year has served to take up more than half of that 

unanticipated shortfall. 

Second, I know that Ken Mead, the Department of Transportation Inspector General, has issued a report stating that Amtrak 

will not achieve operational self-sufficiency by 2003 if we continue 

along our business plan of last year. His concern is based primarily 

on a set of undefined actions in order to increase revenues and reduce cost. We are addressing those concerns as a board. Last week 

at our board meeting we approved a brand-new business plan, Mr. 

Chairman and members, for 2001 that reduces the undefined actions over a 4-year period to less than 1 percent of our total expenses annually. I can assure you that Amtrak will have no difficulty identifying further actions. 

But as a Governor, I am here to tell you that this country needs 

more than just a self-sufficient Amtrak. We do need high-speed 

trains in heavily populated areas that take the pressure off the 

overloaded airports and the highways. We need a national long-distance train network supporting our rural communities and carrying 

critical express cargos. 

We need to respond to the demands of Governors, Congressmen, 

Senators, and mayors all across this country who are clamoring for 

a high-speed rail system this country can be proud of, and that is 

just part of the kind of pressure we are receiving, is what we gave 

to Ken Mead. 

The High Speed Rail Investment Act will provide the necessary 

capital funds for rail through an innovative financing mechanism 

that requires State participation through a match just like in the 

highway, just like in the transit programs. This is a new and, yes, 

a creative way to get the capital funds to get high-speed corridor 

projects that are ready and waiting and demanding to be built. 

Let me be perfectly clear. This is not about a bail-out for Amtrak. 

We do not need a bail-out, Mr. Chairman, and that is not why we 

are supporting this bill. What we do need is capital. What we do 

need is for States around this country to have a federal matching 

program, as with highways, as with airports, as with mass transit, 

a program that assists them in making the rail infrastructure investments necessary to support our growing system. 

22

Mr. Chairman, for much of Amtrak’s history it was not run like 

a business, did not have an entrepreneurial focus, and did lack a 

serious business plan, but in recent years, Mr. Chairman, since the 

reauthorization, we have made remarkable progress in turning 

Amtrak around, reducing our dependence on federal operations 

support, and we will continue to do so for as long as this board is 

in existence and for as long as Congress has given us the support 

that we deserve. 

Thank you, Mr. Chairman. 

[The prepared statement of Governor Thompson follows:]

PREPARED STATEMENT OF GOVERNOR TOMMY THOMPSON, CHAIRMAN OF THE AMTRAK

REFORM BOARD, ACCOMPANIED BY GEORGE WARRINGTON, PRESIDENT, NATIONAL

RAILROAD PASSENGER CORPORATION

Mr. Chairman, I thank you and the distinguished Members of this Committee for 

giving me the opportunity to describe how Amtrak is well on its way toward achieving operational self-sufficiency by fiscal year 2003, as required by the Amtrak Reform and Accountability Act of 1997. 

As you well know, the Act was the first significant step in relieving us of the burden of being all things to all people, and to start acting and performing like a business. 

To that end, one of the Board’s first actions in 1998 was the adoption of a fiveyear Strategic Business Plan that is transforming Amtrak into a market-based, customer-focused operation. I’ll be discussing the Business Plan, and the extraordinary 

results it has achieved in just a moment. 

But first, both as a Republican and as the Chairman of Amtrak’s Board, I’d like 

to say how very proud I am that 2 of our nation’s most prominent Republicans—

yourself, Mr. Chairman, and Gov. George W. Bush of Texas—were our guests this 

summer aboard Amtrak trains. We feel deeply privileged to have hosted you, along 

with nearly 6.2 million other Americans, all of whom took to the rails this summer—a number unprecedented in Amtrak’s history. 

The record-breaking ridership and revenue figures helped us turn an important 

corner—not only in Amtrak’s corporate history, but also in America’s transportation 

history. Although hardly anyone predicted it 29 years ago when Amtrak was created, railroads are experiencing a renaissance in America today. There are 2 reasons for this. 

First, travelers are demanding a more personalized way to travel. And you can’t 

get much more comfortable than rail travel. In contrast, our highways are jammed, 

and the news from this summer on the airline side only gets worse. It’s bad enough 

reading the headlines of hundreds of flight cancellations each day, but I have also 

heard some personal horror stories from travelers that underscore a real need for 

a balanced transportation system. I guess the fact that this summer O’Hare has had 

to order more than the normal 1,500 cots reserved for snowstorms says it all. 

I believe the second reason for the renaissance is that when travelers board the 

train and go with Amtrak they receive better service than the airlines provide and, 

frankly, better than what we have been able to provide in the past. We have worked 

hard over the last year preparing to launch an unprecedented national satisfaction 

guarantee—and on July 4, we did it! 

Our focus is on providing our customers—or guests, as we prefer to call them—

with an enjoyable travel experience, and that means a new level of service in the 

travel industry for every customer. Faster, more efficient service. Consistently professional, highly personalized service. Striking new and renovated stations. And, of 

course, new and refurbished trains with a rich package of amenities for our guests’

pleasure and comfort. 

Under the guarantee, we promise all of our guests a safe, comfortable and enjoyable travel experience. If guests are not satisfied at any point in their Amtrak travel 

experience, and if our employees can’t make it right, they’ll get a Service Guarantee 

Certificate, entitling them to equivalent free travel in the future. 

Amtrak launched the Service Guarantee because it makes good business sense. 

The guarantee and the improved service are designed to increase passenger satisfaction and cause those who have tried Amtrak to return with greater frequency. We 

estimate that just a one-percent increase in our guest retention rate will add $13 

million in revenues. Moreover, getting customers to tell us about problems in our 

23

service is a virtually cost-free way of identifying and correcting the things that tend 

to drive people away from Amtrak. 

Mr. Chairman, I believe that it’s the convergence of these 2 factors—on the one 

hand, travelers searching for an alternative; on the other, Amtrak’s new, unconditional commitment to passenger satisfaction—that is behind the current railroad 

renaissance. 

There are 3 additional points that I’d like to make about the resurgence of passenger rail. 

First of all, it’s real. It’s not one of those flash-in-the-pan, here today, gone tomorrow phenomena. And, the reason railroads are here to stay has to do with dollars 

and cents. As I’m sure Committee Members know, the costs of building new highways and airports are soaring. And, while we must maintain our highways and airports, you get more ‘‘bang for your buck’’ by investing your transportation dollar in 

passenger rail, than by investing that same dollar in new highway or airport construction. 

The second critical point about the current railroad renaissance is that, although 

I have naturally focused on Amtrak, public investment in passenger rail can also 

revitalize the infrastructure of the railroad freight industry, and result in increased 

capacity for freight as well as passenger railroads. That’s why public investment in 

Amtrak is a classic ‘‘two fer’’: By unclogging our highways and airlanes, it helps 

commuters; by unclogging the arteries of our commerce, it helps shippers and manufacturers. 

My third point about the national rail renaissance is that it’s crucial to the success of our entire national transportation system. What most people fail to understand about this system is that it’s a balanced network consisting of highways, airports and railroads. And the balance is surprisingly delicate. If you remove passenger railroads from the balance, then the other parts of the system just won’t 

work right. But if you’ve got a strong railroad system that takes some of the pressure off of our highways and airports, then you enable them to fulfill their potential, 

as well. 

The goal of public policy, Mr. Chairman, should be to create a framework within 

which our highways, our airports and our railroads can work together to create a 

seamless transportation network that provides Americans with the widest array of 

travel choices. 

Today, more and more Americans want to travel, and we all need to work together to provide them with seamless travel options. Amtrak plays an important 

role in the mix. For instance, on long-distance trips, travelers would fly to major 

hubs, and then for shorter distances, rely on high speed rail services. As I put it 

in my State of the State Address to the Wisconsin legislature last January, ‘‘Soon, 

the business traveler will fly from Washington to Milwaukee, jump on a high-speed 

train to Madison, then catch a bus to drop her at her doorstep just in time for dinner with the family, cooked by her husband.’’

I am pleased to report that Amtrak has already taken steps to build a seamless 

system with its partners. We have an unprecedented agreement with Continental 

Airlines to connect their customers to our stations in the Northeast for portions of 

their trip and to reroute them on our trains in inclement weather. Working with 

Hertz, we now have rental car services available at 56 stations in the country, and 

the number is growing. And we work with Coach USA and Greyhound to take travelers to their hotels and destinations once they step off our trains. 

This spirit of entrepreneurial partnership has helped us achieve some mighty impressive financial successes in the last year, and it is the kind of spirit that will 

help us fulfill our legal obligations under the Amtrak Reform and Accountability 

Act. 

Amtrak’s relentlessly entrepreneurial focus informs every step we take. Our partnerships with the freight railroads have already helped grow our Mail and Express 

business by 30 percent over last year—and we’ve only begun to explore the possibilities of what promises to be a vastly—and mutually—profitable relationship. 

Our Network Growth Strategy will expand rail service in 21 states, further grow 

our Mail and Express business, and generate $255 million in improvements to our 

bottom line by 2003. This service expansion is not about trying to be all things to 

all people. It’s about the basic economic principle that in order to cover your fixed 

costs, you must expand your operations and grow revenues. It’s about growing to 

prosperity, not cutting services and killing your market just to meet a budget. 

Thanks to our strategic investments in state-of-the-art technology, our Call Centers—which won the ‘‘Best Call Center’’ Award from Call Center Magazine in 1998—

are doing even better today. Sales per man-hour are up 11 percent over last year, 

to $859/hour; ticketed sales are up 12 percent, to $487 million; and bookings are 

up 12 percent, to $1.7 billion. 

24

And our partnerships with states to build regional, high-speed rail corridors will 

have a profound impact on our financial situation, as well as on America’s transportation system. 

Mr. Chairman, Amtrak is absolutely committed to building a market-based national system whose economic viability derives from both passenger revenue and 

commercial ventures. On January 31, 2000, we took a major step in the realization 

of our vision by launching Acela Regional train service between Boston and New 

York. The new, all-electric Acela Regional service dramatically reduces travel time 

within New England, making rail attractive for both leisure and business travelers. 

Ridership on the Acela Regional is up 42 percent over the trains it replaced, adding 

millions to the bottom line. 

The Regional service will prime customers for the arrival of the Acela Express. 

When all 20 high-speed trainsets are operating, travel time between Boston and 

New York will be reduced to a little over 3 hours, and between New York and Washington to as little as 2 hours and thirty minutes. We anticipate gaining 3 percentage 

points in market share, from 12 to 15 percent, in the Northeast. 

But high-speed rail is not something just the Northeast wants. Across America, 

interest in high-speed rail is running high. That’s why 36 states are working with 

Amtrak on passenger rail projects—and 28 of those states are investing in highspeed rail projects. California, for example, plans to invest $700 million for intercity 

passenger rail investment next year. Also, as part of the $5 billion Midwest Regional Rail Initiative, Illinois plans to spend $140 million; Michigan has already 

spent $25 million; and my own state, Wisconsin, plans to spend $60 million. The 

state of Washington has invested $125 million, New York will invest $100 million 

and both North Carolina and Pennsylvania are investing at least $70 million in 

high-speed rail projects respectively. Virginia recently approved $75 million in new 

spending for the Richmond Washington high-speed rail corridor, and Georgia recently approved $200 million for investment in high-speed rail and commuter in 

that state. 

As I said earlier in my testimony, the railroad renaissance is real! 

Mr. Chairman, the initiatives I’ve described are already producing spectacular results: 

Amtrak continues to break ridership and revenue records. A 21-year high of nearly 2.1 million passengers rode Amtrak in August, leading to an all-time monthly 

ticket revenue record of $108.4 million. The record setting August ticket revenues 

broke July’s record ticket revenues of $107.2 million, and was the third month in 

a row that ridership surpassed 2 million. With only a few days left in the current 

fiscal year, Amtrak is on course to set a record for annual ticket revenue and to 

break its all-time annual ridership record of 22.2 million passengers. 

We expect ridership and ticket revenues to grow even faster in the coming year 

with the introduction of Acela Express. The Federal Railroad Administration (FRA) 

has been working in lockstep with Amtrak and the manufacturers during the testing and we have just received a favorable review and certification from the FRA. 

We anticipate that the manufacturers will offer the trainset for conditional acceptance by Amtrak any day and that we will soon thereafter launch the service. 

Mr. Chairman, the strong financial performance of our company assures that, 

with continued federal capital support, Amtrak will meet its business plan target 

of operating self-sufficiency by 2003. Amtrak is successfully continuing along the 

congressionally-mandated glidepath to end federal operating assistance. We will require no more than the planned $362 million in federal support for operating expenses this year, $122 million less than last year. And, we will meet or improve 

upon the cash plan contained in the Corporation’s Business Plan. Finally, we have 

been predicting that we would have a revenue shortfall due to the delay in the 

launch of Acela Express. This remains true, but I am pleased to tell you that our 

strong performance so far this year has served to make up more than half the anticipated shortfall, so that we will miss our Business Plan goal for bottom-line performance by $60–$70 million, not $150 million. 

Still, the question remains: How can we sustain Amtrak’s successes and create 

a passenger rail system that truly is an integral part of our transportation network? 

Well, the answer is no surprise. Like every other mode of transportation, passenger rail needs federal capital investment funds. The $2.2 billion that Amtrak received from the Taxpayer Relief Act has provided critical funding to keep Amtrak 

on its path to operating self-sufficiency. But, as a Governor, I’m here to tell you that 

the country needs more than just a self-sufficient Amtrak. We need high-speed 

trains in heavily populated corridors that take the pressure off the overloaded airports and highways. We need a national long-distance train network supporting our 

rural communities and carrying critical express cargoes. We need the federal govVerDate Apr 24 2002 09:19 Dec 10, 2003 Jkt 085968 PO 00000 Frm 00028 Fmt 6633 Sfmt 6621 S:\WPSHR\GPO\DOCS\85968.TXT SCOM1 PsN: CAROLT
25

ernment to take a leadership role in investing in an interstate railroad system that 

this country can be proud of. 

The High Speed Rail Investment Act would provide the necessary funds for rail 

through an innovative financing mechanism that requires state participation 

through a match—just like in the highway and transit programs. This is a new and 

creative way to get the capital funds to high-speed corridor projects that are ready 

and waiting to be built. This is not about a ‘‘bailout ‘‘ for Amtrak. We don’t need 

a bailout, and that’s not why we’re supporting this bill. What we do need is for 

states around the country to have a federal matching program, as with highways 

and transit—a program that assists them in making the rail infrastructure investments necessary to support our growing system. 

Mr. Chairman, I’d like to conclude my statement by acknowledging that there was 

a lot to criticize about the old Amtrak. For much of our history, I’m afraid that Amtrak was not run like a business, did not have an entrepreneurial focus, and lacked 

a serious business plan. 

Fortunately, Mr. Chairman, your leadership has helped this corporation turn 

itself around and reduce our dependence on federal operating support. You have focused on our shortcomings to help strengthen our focus, and to hold us accountable 

for becoming an operationally self-sufficient, market-oriented, moneymaking enterprise. That is why, though we have crossed swords in the past, and may well do 

so again today, you should know that I have the deepest admiration and respect 

for you, and for your vision of what Amtrak can be. 

Thank you, Mr. Chairman.

The CHAIRMAN. Thank you, Governor Thompson. 

Ms. Scheinberg, welcome back. 

STATEMENT OF PHYLLIS F. SCHEINBERG, ASSOCIATE

DIRECTOR, TRANSPORTATION ISSUES, U.S. GENERAL

ACCOUNTING OFFICE 

Ms. SCHEINBERG. Thank you, Mr. Chairman and Members of the 

Committee. I appreciate the opportunity to testify today on Amtrak’s progress toward operating self-sufficiency, its capital investment needs, and the future of Amtrak and of intercity passenger 

rail in this country. 

In summary, Amtrak’s financial performance has not been 

bright, and the railroad faces substantial capital needs. Also, in the 

next years the Congress will be asked to make important decisions 

about the future of Amtrak and the Nation’s intercity passenger 

rail. There are 3 points I would like to make. 

First, Amtrak continues to struggle financially, and must overcome major hurdles to reach operational self-sufficiency by 2003. 

Specifically, Amtrak has made relatively limited progress toward 

self-sufficiency. In the last 5 years, it has reduced its budget gap 

by only $78 million, and must reduce the gap by another $287 million before 2003. 

This financial struggle has continued this year. Amtrak is significantly behind its current year goal of closing its budget gap by 

$114 million. In fact, through June of this year it was $80 million 

behind its planned reductions. 

The CHAIRMAN. $80 million behind how much? 

Ms. SCHEINBERG. $114 million is what it was going to achieve 

this current year, and the data we got from Amtrak was through 

the third quarter of this year. It was $80 million behind the $114 

million goal. It had achieved $33 million of the $114 million goal. 

The CHAIRMAN. Thank you. 

Ms. SCHEINBERG. I do not have the latest quarter’s results. We 

will have them soon. 

26

We have heard today and previously from Amtrak that its revenues are up. These increases tell only half the story. They tell the 

good news. While revenues are up, so are costs, and the cost increases tell the other half of the story, which is the bad news. Unfortunately, the cost increases have mostly wiped out the impact of 

the revenue and ridership gains that Governor Thompson talked 

about. Amtrak is largely no better off today than it was a year ago. 

Given the limited progress that Amtrak has made toward selfsufficiency, it will need to make significantly more progress than 

it planned in the next 2 years. This will be extremely difficult, 

given that Amtrak’s costs are expected to increase. While Amtrak’s 

business plans have tended to hold cost increases to the rate of inflation, Amtrak’s operating costs increased 12 percent above inflation during the 5 years from 1995 to 1999. 

The impact of these cost increases is that while Amtrak spent 

money to make money, it has realized little benefit from the expenditures that it has made. During the past year, as in each of 

the previous 5 years, for every operating dollar that Amtrak spent, 

it earned only about 64 cents in total revenue. 

It is going to be extremely difficult for Amtrak to turn this trend 

around because of upcoming events. For example, the results of ongoing collective bargaining with its labor unions and the expected 

increased interest expenses from financing the new train sets are 

2 of the challenges that Amtrak faces. 

My second point today is that Amtrak has substantial short-term 

and long-term capital investment needs that will be difficult to 

meet. We have estimated Amtrak capital needs to be at least $4 

billion just through 2004, and at least $9 billion through 2015. 

Most of these needs are in the Northeast Corridor, and include life 

safety improvements and bringing the corridor up to a state of good 

repair. Amtrak will find it very difficult to pay for these needs. 

Between 2001 and 2004, Amtrak’s capital needs will exceed ex- pected federal capital funds by about $2 billion. Some of this 

amount could be paid by other users of Amtrak facilities. However, 

the federal government could be called upon to cover any shortfall. 

If so, the federal support requested could be substantially higher 

than current appropriation levels. 

Moreover, Amtrak has not identified all of its capital needs or 

their costs. It has not identified even all of its needs on the Northeast Corridor, or the needs of its existing routes off the Corridor, 

nor has Amtrak identified its needs for new equipment, or for the 

costs related to the network growth strategy, or for the costs of expanding its mail and express service, and Amtrak has not yet developed the costs of the new high-speed rail corridors across the 

country. 

The reason Amtrak does not know the costs of all these capital 

investments is that it has not had a comprehensive multi-year capital plan since 1997. We have recommended that Amtrak develop 

such a plan, including the related benefits of the capital investments, the priorities of the needs, and the likely funding sources. 

My final point today is that no matter whether Amtrak succeeds 

or fails in reaching self-sufficiency, important decisions will need to 

be made about the future of Amtrak, the scope of intercity passenger rail service in the United States, and the levels of federal 

27

1 Intercity Passenger Rail: Amtrak Will Continue to Have Difficulty Controlling Its Costs and 

Meeting Capital Needs (GAO/RCED–00–138, May 31, 2000), Intercity Passenger Rail: Amtrak 

Needs to Improve Its Accountability for Taxpayer Relief Act Funds (GAO/RCED/AIMD–00–78, 

Feb. 29, 2000), and Intercity Passenger Rail: Amtrak Faces Challenges in Improving Its Financial Condition (GAO/T–RCED–00–30, Oct. 28, 1999). 

support. Even if Amtrak does reach self-sufficiency, it will need 

substantially more federal funds than it currently receives each 

year. The $9 billion that Amtrak will need just to meet identified capital needs are needs that are critical to maintain current service 

levels and will require an average of $600 million a year. In addition, Amtrak will require about $200 million annually to cover excess railroad retirement payments. As a result, the federal government could be called upon to provide substantially more annual 

funding for Amtrak than the $521 million it currently provides. 

The CHAIRMAN. What range are you talking about? 

Ms. SCHEINBERG. Potentially twice as much. We would be talking $1 billion if Amtrak reaches self-sufficiency. If Amtrak fails to 

reach self-sufficiency, the Congress would be called upon to decide 

the future of Amtrak and the future of intercity passenger rail in 

general. It is not too early for the Congress to begin considering 

what its long-term vision is for Amtrak and intercity passenger 

rail, and how this vision should be implemented. This would include determining the scope of a national intercity passenger rail 

network, if any, how that network would be operated, and the level 

of federal funding that would be provided to support the network. 

Mr. Chairman, that concludes my statement. I will be happy to 

answer any questions. 

[The prepared statement of Ms. Scheinberg follows:]

PREPARED STATEMENT OF PHYLLIS F. SCHEINBERG, ASSOCIATE DIRECTOR, TRANSPORTATION ISSUES, U.S. GENERAL ACCOUNTING OFFICE

Mr. Chairman and Members of the Committee: 

We appreciate the opportunity to testify today on the National Railroad Passenger 

Corporation’s (Amtrak) progress toward achieving operating self-sufficiency; its capital investment needs and how these capital needs compare with expected federal 

funding; and the future of Amtrak and intercity passenger rail. The Congress has 

directed Amtrak to be free of federal operating subsidies by the end of fiscal year 

2002. This deadline presents serious implications for the future of Amtrak and 

intercity passenger rail service in this country. This statement is based on our recent reports on Amtrak financial issues.1

In summary:

• Amtrak continues to struggle financially and must overcome substantial hurdles to reach operational self-sufficiency. Amtrak has made limited progress in 

reducing its budget gap—the gap that Amtrak needs to close to reach operational self-sufficiency. From fiscal years 1995 through 1999, Amtrak was able 

to reduce its budget gap by only $78 million—from about $554 million to $476 

million. From fiscal years 2000 through 2002, Amtrak will need to achieve 

about $287 million in additional savings to reach operational self-sufficiency. 

Yet Amtrak has made limited progress toward this goal in the first 9 months 

of this fiscal year. Furthermore, Amtrak’s costs are expected to increase, and 

Amtrak has a mixed record in controlling cost growth. In addition, Amtrak’s 

ability to realize substantial revenue increases and productivity improvements 

is uncertain. Nearly three-quarters of the $1.9 billion in net financial benefits 

that Amtrak expects to achieve between now and 2004 have either not been 

identified or are based on initiatives that have yet to be fully implemented.

• Amtrak has substantial short- and long-term capital investment needs that will 

be difficult to meet. From discussions with Amtrak managers and a review of 

published reports, we estimate Amtrak’s identified capital needs to be at least 

28

2The Amtrak Reform Council is an independent oversight body created by the Amtrak Reform 

and Accountability Act of 1997. 3 Amtrak participates in the railroad retirement system, under which each participating railroad pays a portion of the total retirement and benefit costs for employees of the industry. 

$9 billion through 2015 (in 1999 dollars). In addition, Amtrak will have other 

capital needs, such as acquiring new equipment, for which the company has not 

yet developed cost estimates. Amtrak will find it difficult to pay for these needs. 

Over the 2001 through 2004 period, the identified capital investment needs will 

exceed expected federal capital funds by nearly $2 billion. Although some of this 

amount may be paid by other railroads that use Amtrak facilities, the federal 

government could be called upon to cover any funding shortfall, with capital financial support requested substantially higher than current levels.

• Key decisions will soon have to be made regarding the future of Amtrak, the 

nation’s intercity passenger rail operator. If Amtrak does not reach operational 

self-sufficiency within the next 2 years, federal law requires that the Amtrak 

Reform Council submit a plan to the Congress for a restructured intercity passenger rail system and that Amtrak prepare a plan for its own liquidation.2 On 

the other hand, if Amtrak does attain operational self-sufficiency, it could require a substantially higher level of financial support than it receives now to 

meet its capital needs and for certain railroad retirement expenses. In either 

case, the future of Amtrak will need to be decided. If that future does not include Amtrak, basic decisions must be made about an intercity passenger rail 

system. The decisions include the scope of a national intercity passenger rail 

network, if any; how it would be operated; and the level of federal funding that 

would be provided to support this network. 

Background

The Rail Passenger Service Act of 1970 created Amtrak to provide intercity passenger rail service. Like other major national intercity passenger rail systems in the 

world, Amtrak has received substantial government support—over $23 billion 

through fiscal year 2000. However, the Amtrak Reform and Accountability Act of 

1997 (Amtrak Reform Act) prohibited Amtrak from using federal funds for operating 

expenses, except for an amount equal to excess Railroad Retirement Tax Act payments, after 2002.3 To help accomplish this goal, the Amtrak Reform Act provided 

Amtrak with flexibility to address certain costs. The act eliminated a statutory ban 

on contracting out work that would result in employee layoffs and abolished statutorily required labor protection arrangements that provided up to 6 years of compensation for employees who lost their job because of the discontinuance of intercity 

passenger rail service on a route or certain other actions. The Amtrak Reform Act 

required negotiations with the unions over new protection arrangements. To help 

achieve its financial goals, Amtrak has developed a series of strategic business 

plans. 

Amtrak, like other railroads, is a very capital-intensive business. Since its creation, Amtrak has spent about $10.2 billion in federal support for capital improvements and equipment overhauls. This amount includes about $1.8 billion of the $2.2 

billion that Amtrak received through the Taxpayer Relief Act of 1997. These funds 

could be used for broadly defined expenses, including (1) acquiring equipment, rolling stock (such as passenger cars and locomotives), and other capital improvements; 

(2) upgrading maintenance facilities; (3) maintaining existing equipment in intercity 

passenger rail service; and (4) paying of interest and principal on obligations incurred for these purposes. Amtrak has also obtained capital funding from state and 

local governments, generally for specific capital investments, and from the commercial debt markets. These funds support Amtrak’s 22,000-route-mile passenger rail 

system, including 650 miles of track owned by Amtrak. Amtrak maintains an active 

fleet of 2,600 cars and locomotives. 

Amtrak Will Have to Overcome Major Hurdles to Become Operationally 

Self-Sufficient 

Amtrak continues to struggle in its quest to become operationally self-sufficient 

by the end of 2002. Amtrak has made relatively little progress over the past 5 years, 

and the results for the first 9 months of the current fiscal year in reducing its budget are not encouraging. This means that substantial additional progress will be required over the next 2 years to attain operational self-sufficiency. One of Amtrak’s 

difficulties in reaching operational self-sufficiency is controlling its costs, particularly labor costs. Finally, Amtrak has yet to fully implement the various revenue 

29

4 Acela Express is part of Amtrak’s high-speed rail program on the Northeast Corridor. Acela 

Express trains are expected to reach speeds of up to 150 miles per hour and have trip times 

of about 3 hours between New York City and Boston and about 21⁄2 hours between New York 

City and Washington, D.C. 5 Amtrak defines budget gap as the corporation’s net loss (total revenues less total expenses) 

less capital-related expenses, including the depreciation of its physical plant, other noncash expenses, and expenses from its program to progressively overhaul railcars (i.e., to conduct limited 

overhauls of cars each year rather than comprehensive overhauls every several years). 6The 1998 budget gap excludes $36 million in retroactive payments under recently negotiated 

labor agreements. 7 ‘‘Express’’ is the transportation of higher value, time-sensitive goods, such as produce. 8This amount represents the $476 million budget gap in 1999 less expected excess Railroad 

Retirement Tax Act payments in 2002 of $189 million. 9 In addition, Amtrak’s overall financial condition has also not improved. Through the first 9 

months of this year, Amtrak’s net loss was about $711 million—about $6 million higher than 

it was for the same period in fiscal year 1999 ($705 million). Amtrak’s lower-than-expected performance appears to be related to higher expenses rather than lower revenue. 10See GAO/RCED–00–138. 

enhancing and productivity improvement initiatives that it considers important to 

operational self-sufficiency, including its Acela Express service.4

Most Financial Results Needed to Reach Operational Self-Sufficiency Are in the Future 

Amtrak has made limited progress in moving toward operational self-sufficiency 

in the last 5 years. According to Amtrak, its budget gap 5 fell by $78 million during 

fiscal year 1995 and through 1999—from about $554 million in fiscal year 1995 to $476 million in fiscal year 1999.6

Through the first 9 months of the current fiscal year (October–June), Amtrak’s revenue increased by 11 percent over the same period in 1999. But, expenses increased by 7 percent. Since Amtrak has about $3 in expenses for every $2 in revenue, the increase in expenses for the most part negated revenue gains. As a result, 

the budget gap was only about $33 million lower than it was for the same period 

in 1999. Amtrak officials agreed that additional actions are needed during the final 

3 months of this year to achieve the planned budget gap reduction of $114 million 

and that achieving its goal will be difficult. Amtrak attributes the problems to the 

delayed rollout of the Acela Express service and a slower-than-expected increase in 

its mail and express business.7

The limited progress that Amtrak has achieved in reducing its budget gap makes 

it essential that Amtrak make substantial strides over the next 2 years to achieve 

operational self-sufficiency. To become operationally self-sufficient by 2002—that is, 

to reduce its budget gap to no more than the amount of excess Railroad Retirement 

Tax Act payments—Amtrak will have to reduce its budget gap by an additional $287 million 8 over what it was in fiscal year 1999. This is nearly 4 times the reduction that Amtrak made in the last 5 years. It is therefore critical that Amtrak take 

those actions necessary to control cost growth and achieve the revenue projections 

contained in its latest business plan.9

Amtrak Will Continue to Have Difficulty Controlling Its Costs 

Amtrak has had and will continue to have difficulty controlling cost growth. Amtrak met its expense targets in 1998 and 1999 but missed them from 1995 to 1997 

and, overall, its expenses have been about $150 million more than planned over this 

period. Amtrak’s strategic business plans have generally tried to hold cost increases 

to no more than the rate of inflation. But, as we recently reported, Amtrak’s operating costs increased by about 12 percent over the rate of inflation from 1995 

through 1999.10 Amtrak’s inflation-adjusted costs (1999 dollars) were about $2.4 billion in 1995 and about $2.7 billion in 1999. Amtrak has attributed increased costs 

to, among other things, the results of labor negotiations, expanded service levels, increased depreciation, and the implementation of its progressive overhaul program. 

While Amtrak has ‘‘spent money to make money,’’ it has realized little benefit from 

the expenditures it has made. For example, in 1995, for every operating dollar that 

Amtrak spent, it earned $0.65 in total revenue. In comparison, Amtrak earned $0.67 

in total revenue for every dollar spent in 1999. Through the first 9 months of this 

fiscal year, Amtrak has earned about $0.64 in total revenue for every dollar expended. 

Labor costs represent Amtrak’s single largest operating cost—about 52 percent of 

total operating costs in 1999. Amtrak’s labor costs have increased since 1995—about 

10 percent above the rate of inflation (from about $1.3 billion to about $1.4 billion). 

This is a net increase, that is, net of the savings achieved through such actions as 

negotiated productivity improvements. In part, this increase reflects the fact that 

30

11This includes the costs of progressive overhauls. Amtrak funds progressive overhauls 

through its capital program. However, under generally accepted accounting principles, the cost 

of such overhauls are considered an operating expense. 12Total negotiated wage payments (including general wage increases, signing bonuses, and 

retroactive payments) were $260 million. Amtrak expects to pay the balance of this amount 

($116 million) in 2000. 

the size of Amtrak’s workforce has not changed materially in recent years. In 1999, 

Amtrak employed about 22,500 agreement (union represented) employees and about 

2,700 management employees—about the same total as in 1994 when Amtrak started to reduce its workforce. Amtrak officials attributed employment increases to such 

things as service expansion and capital investments. In part, increases in labor costs 

may also reflect that Amtrak has no standard measures of labor productivity for its 

different lines of business (e.g., intercity passenger rail service and commuter service). Such measures would allow Amtrak to determine its efficiency and better manage cost growth. 

Amtrak’s cost growth can be expected to continue. Amtrak’s operating plan for 

2000 shows that overall operating costs will increase by a net $60 million over the 

next 5 years.11 This is a net increase because it includes growth in such costs as 

labor and interest expenses as well as savings from such things as productivity improvements. Regarding labor costs, Amtrak has entered into a new round of collective bargaining with its union-represented employees. If the new round of bargaining follows the pattern of past negotiations, substantial cost increases can be 

expected. As a result of collective bargaining for 1998 to 1994, Amtrak estimated 

that wages increased between $120 million and $140 million. As a result of the most 

recently completed round of bargaining (1995 to early 2000), Amtrak estimated that 

wage payments increased by $144 million through 1999.12

Important Business Plan Initiatives to Increase Revenues and Improve Productivity 

Have Yet to Be Fully Implemented 

Amtrak’s plans to reach operational self-sufficiency emphasize business growth, 

particularly increasing revenues and improving productivity. Over the next several 

years, Amtrak expects substantial increases in revenue from such initiatives as implementing its Network Growth Strategy (a strategy to increase passenger and mail 

and express business) and new service standards designed to ensure a consistent, 

high-quality product. Amtrak’s most recent business plan update estimates that initiatives such as these will result in net financial improvements of about $1.9 billion 

through 2004. 

Nearly three-quarters ($1.4 billion) of the net financial benefits that Amtrak expects to achieve from 2000 through 2004 have either not been identified or are 

based on initiatives that Amtrak has not yet fully implemented. (See table 1.) These 

include such initiatives as expanding the mail and express program, developing actions to improve productivity, implementing the market-based route network, and 

implementing service standards. Amtrak officials told us they are in the process of 

defining the specific actions associated with these initiatives but agreed they had 

not yet been fully defined. That Amtrak has not fully implemented its most important business plan initiatives increases the uncertainty about whether it can meet 

its financial goals over the next 2 years.

31

Table 1: Estimated Financial Impacts of Amtrak’s Business Plan Initiatives, Fiscal Years 2000 Through 2004

Dollars in millions 

Initiative Change in revenues Change in expenses Net impact 

Productivity actions to be determined $70.3 –$803.6 $874.0Aligning route structure to customer demand 30.0 –205.0 235.0Increasing ticket revenue 175.2 5.9 169.2Mail and express expansion 274.3 181.4 92.9Productivity actions to offset inflation a 0 –54.2 54.2

Subtotal $549.8 –$875.5 $1,425.3

Implement other initiatives 429.5 –80.7 510.2Total $979.2 –$956.2 $1,935.51

Note: Totals may not add due to rounding. Amtrak’s business plan does not contain a separate initiative for its Acela Express service. Rather, Acela Express is integrated into the plan as a whole. a Amtrak officials told us that this initiative is a combination of actions designed to achieve cost savings to offset potential cost increases due to inflation. These activities include wage and work rule changes, revenue enhancements, and 

improved food and beverage management. 

Source: GAO’s analysis of Amtrak’s data 

32

13 Acela Regional is designed to replace Amtrak’s current NortheastDirect, Empire, and Keystone service and will offer improved equipment, trip times, and schedules. 14See GAO/RCED–00–138. All amounts in this section are in constant 1999 dollars. Amtrak 

has not comprehensively identified its short- and long-term capital investment needs. Therefore, 

to identify these needs, we asked Amtrak managers to identify capital investments they believed 

are needed to maintain current service levels and improve Amtrak’s service and reviewed Amtrak and other reports addressing capital investment needs. As a result, the needs we identified 

may not be the same as those that might have been identified by Amtrak, had it comprehensively identified its capital needs. 15 Amtrak expects to share some portion of this cost with other users of the Northeast Corridor. 

In addition, Amtrak has encountered difficulties in implementing high-speed rail 

service on the Northeast Corridor. Amtrak’s Acela program is one of the cornerstones of Amtrak’s plans to eliminate the need for federal operating subsidies. In 

January 2000, Amtrak began Acela Regional service on a limited basis between 

Washington, D.C., and Boston.13 However, the introduction of Acela Express has 

been delayed by mechanical problems since September 1999, and Amtrak has yet 

to announce a start date for this service. Amtrak expected the Acela Express to generate about $180 million in net revenues by 2003. Amtrak officials agreed that revenues have been lost because of Acela Express delays and are still quantifying these 

losses as the delay continues. According to Amtrak, the company is currently identifying actions that might be needed to offset lost Acela Express revenues and reduce 

Amtrak’s budget gap as a whole. The loss of Acela Express revenue increases the 

pressure on Amtrak to make even more progress in other areas over the next 2 

years to reach operational self-sufficiency. 

Amtrak’s Capital Needs Could Require an Increase in Federal Support 

Amtrak has substantial capital investment needs that could result in requests for 

increases in federal capital support. As we recently reported, these needs total over 

$9 billion through 2015.14 These needs include making safety improvements on the 

Northeast Corridor, bringing the Northeast Corridor up to a condition where only 

routine maintenance is required (called ‘‘state of good repair’’), and overhauling 

equipment. However, Amtrak will have difficulty funding these investments. We estimate that Amtrak’s capital investment needs will exceed expected federal funding 

by nearly $2 billion from 2001 through 2004. The shortfall will likely be higher since 

it does not include capital investment needs for which Amtrak has not developed 

cost estimates. 

Amtrak Has Significant Short- and Long-Term Capital Investment Needs 

Amtrak has significant capital needs, both in the short-term (2001 through 2004) 

and in the long-term (2005 through 2015). Our discussions with Amtrak officials 

and review of reports show Amtrak’s capital investment requirements over the next 

4 years (through 2004) to total at least $4 billion. Infrastructure investment needs 

account for over $2.5 billion of the total and are targeted toward addressing deferred 

maintenance and improving the quality of service on the Northeast Corridor.15 Included in these investment needs is about $316 million to continue safety investments at various locations on the Corridor. According to an Amtrak analysis, these 

investments are primarily concentrated on the tunnels leading into and out of New 

York City’s Pennsylvania Station—a station that serves over 300,000 intercity and 

commuter rail passengers daily. In addition, about $1.2 billion will be needed to 

eliminate deferred maintenance and restore the Corridor’s infrastructure to a condition where only routine maintenance is required. Other short-term capital investment needs include reducing equipment maintenance backlogs in the progressive 

overhaul program (at an estimated cost of over $1 billion), repaying debt principal 

for the acquisition of cars and locomotives ($346 million), and upgrading maintenance facilities ($42 million). 

Amtrak’s long-term capital investment needs also focus heavily on the Northeast 

Corridor. We estimate that at least $5.1 billion in investments may be needed from 

2005 to 2015. These capital investment requirements include making further safety 

improvements to tunnels, including those leading into and out of Pennsylvania Station, continuing to restore the Corridor to a state of good repair, and completing the 

highspeed rail program. Most of the long-term capital investments we identified 

(about $4.5 billion) are concentrated on continuing the restoration of the Northeast 

Corridor’s infrastructure to a state of good repair. Other long-term capital investment needs include replacing bridges and tunnels on the Northeast Corridor and replacing and rehabilitating the Corridor’s electric power system (a system that supplies power to Amtrak’s trains and dates from the 1920s to the 1940s). These investVerDate Apr 24 2002 09:19 Dec 10, 2003 Jkt 085968 PO 00000 Frm 00036 Fmt 6633 Sfmt 6621 S:\WPSHR\GPO\DOCS\85968.TXT SCOM1 PsN: CAROLT
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16Our analysis is based on Amtrak receiving $521 million in capital grants beginning in 2001. 

Amtrak’s most recent business plan update also assumes that Amtrak will receive this level of 

capital funding through 2003. No estimate was available for 2004. Recently introduced bills, if 

enacted, could provide capital funds for Amtrak. S.1900 and H.R. 3700 allow Amtrak to issue 

$10 billion in bonds over 10 years for capital improvements to Amtrak’s Northeast Corridor and 

other high-speed rail corridors. 

ments would replace aging systems that are prone to mechanical failures and allow 

for growth. 

In addition to the identified short- and long-term capital needs, Amtrak will have 

other capital investment needs for which it has not developed cost estimates. These 

include equipment maintenance needs and new capital investment needs, such as 

station renovations and acquiring new equipment. Although Amtrak acquired a 

large number of passenger cars and locomotives during the 1990s, some components 

of Amtrak’s fleet are past their useful lives and will need to be replaced. Finally, 

Amtrak will have capital investment needs related to implementing its Network 

Growth Strategy, expanding its express program, and developing new ‘‘high-speed’’ rail corridors across the country. 

Potential Funding Shortfalls May Require Additional Federal Support 

Amtrak’s identified capital investments will exceed expected levels of federal cap- ital funds by nearly $2 billion over the 2001 through 2004 period. Since Amtrak has 

never covered the cost of its operations, it has relied solely on external funds for 

capital investments. This has included the federal government, state and local governments, and the commercial debt market. 

Amtrak should be able to meet its planned investment requirements through 2000 

from Taxpayer Relief Act funds and the fiscal year 2000 federal capital grant. However, beginning in 2001, Amtrak’s capital investment requirements will exceed expected available federal funding. The shortfall assumes that Amtrak will receive 

federal capital grants of $521 million annually through 2004.16 In reality, Amtrak’s funding shortfall will be more than $2 billion because our analysis does not include 

investment requirements for which Amtrak has not yet developed cost estimates. 

The potential shortfall in federal capital funds will require Amtrak to rely heavily 

on sources other than federal capital grants to meet some its needs. However, the 

federal government may well be called upon to fund these shortfalls in amounts substantially higher than current funding levels. 

Analyzing Amtrak’s capital needs and expected funding to meet these needs is 

made more difficult because Amtrak has not prepared a multi-year capital plan 

since 1997. Instead, it has developed a series of capital plans that cover only a limited horizon—not more than 1 year at a time. These plans do not fully describe Amtrak’s current and future capital investment requirements and how they will be 

funded, or indicate their relative priority. Amtrak has stated that it expects to issue 

a multi-year capital plan later this year. 

Time Nears for Decisions on the Future of Amtrak and Intercity Passenger 

Rail 

Amtrak is under extreme pressure to reach operational self-sufficiency by the end 

of 2002. In our opinion, no matter whether Amtrak succeeds or fails in this endeavor, important decisions will need to be made about the scope of intercity passenger 

rail service and the level of federal support, if any. 

If Amtrak attains operational self-sufficiency, it will likely need substantially 

more funds than it currently receives. As discussed earlier, we estimate that Amtrak will need at least $9 billion to meet its identified capital needs through 2015. 

This amount does not include needs for which cost estimates have not been made. 

In addition, Amtrak will require substantial funds annually to cover excess Railroad 

Retirement Tax Act payments, an operating expense for which it may receive federal funds under the Amtrak Reform Act (e.g., according to Amtrak, $190 million 

in 2003 and $200 million in 2004). The federal government could be called upon to 

provide support for both Amtrak’s capital needs and excess Railroad Retirement Tax Act payments, which could total more than the $521 million that Amtrak currently 

receives in federal support. 

On the other hand, if Amtrak fails to reach operational self-sufficiency, the Amtrak Reform Act requires that the railroad submit to the Congress a liquidation 

plan, and the Amtrak Reform Council submit a plan to the Congress for a restructured national intercity passenger rail system. As a result of any congressional action on these plans, the nation’s intercity passenger rail service could have a considerably different look. 

In either situation, the future of Amtrak, and, by extension, the future of intercity 

passenger rail in the United States need to be decided. Given that 2002 is just 2 

34

years away, it is not too early to begin considering a long-term vision for Amtrak 

and intercity passenger rail and how this vision should be structured. If that future 

does not include Amtrak, basic decisions about an intercity passenger rail system 

need to be made. This would include determining the scope of an intercity passenger 

rail network, if any; how it would be operated; and what level of funding would be 

provided to support this network. 

Mr. Chairman, this concludes our testimony. We would be pleased to answer any 

questions you or Members of the Committee may have.

The CHAIRMAN. Thank you very much. Mr. Carmichael, welcome. 

STATEMENT OF GILBERT E. CARMICHAEL,

CHAIRMAN, AMTRAK REFORM COUNCIL 

Mr. CARMICHAEL. Mr. Chairman, thank you for inviting the Amtrak Reform Council to address your Committee oversight on Amtrak today. I would like to make the point that the Amtrak Reform 

Council is a citizens’ group, not paid. I have two of my members 

of the Council here with me today. I would like to introduce James 

Coston, appointed by Senate Minority Leader Daschle, and the 

newest member of our Council, Nancy Rutledge Connery, appointed 

by Senator Trent Lott. 

The CHAIRMAN. Welcome. 

Mr. CARMICHAEL. The Council has provided the Committee a 

statement that addresses in detail each of the topics of your letter 

of invitation. It is a thick report. This morning I will summarize 

for you the Council’s views on Amtrak’s recent financial performance, and the proposed High-Speed Rail Investment Act bonds. I 

will try to make it quick. 

The CHAIRMAN. Take all the time you need, Mr. Carmichael. This 

is a very important issue. 

Mr. CARMICHAEL. On Thursday, September 21, the Department 

of Transportation’s Office of the Inspector General released a report entitled, 2000 Assessment of Amtrak’s Financial Performance 

and Requirements. The Council believes that this report is a highly 

professional work product that reflects the views that are generally 

held of Amtrak’s financial situation. Amtrak definitely faces substantial challenges in its effort to achieve self-sufficiency, and the 

Amtrak Reform Council will continue its program of developing 

tough constructive recommendations designed to assist Amtrak to 

reach that goal by the end of 2003. 

There is little point, Mr. Chairman, in having the Council discuss 

the details of its report. Our own analysis supports its accuracy. 

The report stands on its own feet real well. Thus, I will move on 

to the question of how the Council perceives the proposed legislation to authorize Amtrak to issue bonds to finance high-speed rail 

projects. I think I misspoke a minute ago when I said end of 2003. 

I believe December of 2002 is the date. 

When the Council was asked by the Senate Commerce Committee to testify at this hearing on Amtrak issues, including providing the Council’s views on the proposed High-Speed Rail Investment Act, I directed our staff to send a memorandum to all the 

Council members to determine the views of each Council member 

as to whether the Council should support or oppose the passage of 

this legislation. Having polled its members, I can say that the Amtrak Reform Council supports the objective of the bonds, which is 

to help financially develop a national system of federally desVerDate Apr 24 2002 09:19 Dec 10, 2003 Jkt 085968 PO 00000 Frm 00038 Fmt 6633 Sfmt 6601 S:\WPSHR\GPO\DOCS\85968.TXT SCOM1 PsN: CAROLT
35

ignated high-speed rail corridors, and the Council believes that the 

$10 billion, if managed effectively, can be used to start this important process. 

The Council also supports specific legislation authorizing the 

bonds, providing certain changes that have been part of the ongoing discussion among Amtrak and others in the last few weeks, including our Council staff, that these changes are incorporated into 

the final legislation. 

Having said that, the Council differs in approach on several important issues from the Senate Finance Committee’s concept paper 

that describes the bonds, assuming that no additional changes have 

been made since last Friday. Certain of these issues are policy 

issues that would affect the bond program and how it would operate. There is also a technical issue that could well have impact on 

whether the bond program would be able to operate effectively. 

With regards to policy issues on the bond program, let me address the key issues that the Council sees in the context of the proposed legislation. First, the Reform Council believes the States and 

possibly bona fide high-speed rail authority, as well as Amtrak, 

should be able to issue the bonds. 

Second, it believes that priority should be given to providing 

funding for infrastructure investments, and that the bonds should 

be only used for equipment on the corridors if private financing is 

not available. The Council believes passenger equipment can be 

funded in large part by the private sector. 

The Council’s third issue is that the States and the U.S. Department of Transportation should have a major role in selecting and 

prioritizing the projects. 

From a technical standpoint, the Council also believes there is an 

issue that needs to be addressed as the bill is prepared for consideration, or the entire bond program may not work as effectively as 

it should. This issue relates to whether the bond proceeds should 

be deposited in Amtrak’s corporate treasury prior to a permanent 

investment in high-speed rail projects or otherwise commingled 

with Amtrak funds. 

The Council believes that if the bond proceeds, as well as the escrow fund, are not under the exclusive control of an independent 

trustee, such treatment could have a chilling effect on the marketability of the bonds. It could also tie up the bond proceeds and the 

bond escrow account in court, should there be creditors’ claims 

against Amtrak. 

Mr. Chairman, this position reflects the views of nine of the 11 

Council members concerning the proposed legislation. As for the remaining 2 members, Mr. Charles Moneypenny, the Presidentially 

designated member representing the views of railway labor, he expressed the view that the Council should not take a position on the 

bonds, and the administration, that is in the process of determining 

its position in that. When it is determined, the Council would be 

so advised. We are treating the administration’s position right now 

as a temporary abstention. 

Mr. Chairman, we are now looking for the first time in many 

decades at a domestic intercity transportation picture that actually 

needs the rail passenger modes in many important transportation 

36

markets in this Nation. Air and highway congestion in critical city 

pairs and regions have brought us to this position. 

The States and the cities, or at least a significant number of 

them, faced with the need to find additional useful intercity transportation capacity, are being aggressive in pursuit of the opportunities for improved intercity rail passenger service, and I think that 

explains some of the heavy endorsements that we have seen about 

this bond act. 

The reason we are facing these very difficult issues that these 

bonds pose is that, unlike the highways and the airways, neither 

local nor State governments nor the federal government have determined an institutional or financial solution for adding the track 

and equipment capacity to our Nation’s railroad right-of-way system to provide an expanded system of intercity passenger rail service. 

The privately owned rail right-of-ways present unique issues, 

compared to the publicly owned and publicly funded national systems of highways, airports, and airways. Rail rights-of-ways, unlike 

other modes of transportation, do not have a stable funding mechanism for the rail passenger service to develop, so we should realize 

that under our current transportation policy we are making or 

using Amtrak alone to do what in other modes is done by 2 separate and separately funded types of organization. 

One organization is focusing on infrastructure, and another one 

is focusing on transport operation. The infrastructure organization 

is exemplified by the Federal Highway Administration, operating 

in concert with the State highway departments, the Federal Aviation Administration, and the Corps of Engineers. 

The role of transport operation in all of these modes is carried 

out by operating companies that carry passengers, mail and express, the airlines, the bus lines, and the truck lines, or companies 

in modes other than rail, are not entangled in the huge infrastructure funding burdens. They pay a user fee for the infrastructure 

and focus their attention on serving the traveling public. 

My personal comment, this is a huge burden on Amtrak management and probably is causing the confusion we have as we try to 

analyze how Amtrak should be operating. 

Mr. Chairman, should these bonds not pass in this session of 

Congress, it is likely other ways could be found to finance improvements in intercity rail passenger service, and the federally designated high-speed rail corridors that are evolving such proposals 

might best be developed, I believe, from a well-considered effort by 

experts in transportation policy and finance to determine a modern, 

intermodal surface transportation policy, and an accompanying 

array of financing mechanisms needed to fund improvements in 

intercity passenger rail infrastructure and equipment. 

The Council will be ready to participate in any such discussion 

and debate about how to do the job, and it is my hope that our January report that we are required by law to make will offer some 

solutions in this area to help us fund the intercity rail system and 

to solve some of these problems. 

Thank you very much. 

[The prepared statement of Mr. Carmichael follows:]

37

PREPARED STATEMENT OF GILBERT E. CARMICHAEL, CHAIRMAN, AMTRAK REFORM COUNCIL

Mr. Chairman, thank you for inviting the Amtrak Reform Council to address your 

Committee’s oversight hearing on Amtrak. While I am alone at the witness table, 

I would like to introduce other members of the Reform Council who are here today 

for this important hearing. These members include James Coston, appointed by Senate Minority Leader Daschle, and the newest member of the Council, Nancy Rutledge Connery, appointed by Senate Majority Leader Lott. Also present is a representative of the Federal Railroad Administration, representing the Secretary of 

Transportation’s ex officio position on the Council. 

Mr. Chairman, one of my key objectives as the Council’s Chairman is to focus the 

substantial experience and insight of the Council’s members on solid analyses and 

initiatives designed to improve intercity rail passenger service. Through the earnest 

efforts of the Council’s members, supported by our staff, I believe we have forged 

a pragmatic bipartisan majority that brings a practical and realistic perspective to 

the issues the Congress has charged the Council to address. 

As you requested, the Council has provided to the Committee a statement that 

addresses in detail each of the topics that you raised in your letter of invitation. 

This morning I will summarize for you the Council’s view on Amtrak’s recent performance and the Council’s views on the proposed High-Speed Rail Investment Act 

bonds, designed to continue and expand the task of developing the federally-designated high-speed rail corridors throughout this country. My summary will include:

• Results of Amtrak’s use of new authorities provided by the Reform Act;

• Comments on financial performance and Amtrak’s progress toward self-sufficiency;

• A brief overview of the Council’s perspective on where things stand, as context 

for the Council’s views; and

• The Council’s view of the proposed High-Speed Rail Investment bonds.

How Amtrak Has Used its New Authorities Provided under the Act and 

What Cost Savings the Legislative Reforms Have Actually Generated 

The reforms set forth in the Amtrak Reform and Accountability Act of 1997 (‘‘the 

Reform Act’’ or ‘‘ARAA’’), among other objectives, were intended to eliminate statutory obstacles to essential Amtrak operational, financial and productivity improvements and to provide Amtrak with additional authority to operate more like a private, for-profit business. To this end, the Act, in its major provisions: (1) repealed 

Amtrak’s obligation to provide rail passenger service within the ‘‘basic system’’ defined by statute and provided Amtrak with complete authority to determine its national system of routes and services in response to the marketplace [ARAA Sec.101]; 

(2) repealed the specific statutory requirements for labor protection payments for 

route closures and work transfers and placed the disposition of this issue on the 

labor-management collective bargaining table [ARAA Secs. 141, 142]; and (3) repealed the statutory prohibition against contracting out work and required that this 

issue be placed on the collective bargaining table commencing no later than November 1, 1999 [ARAA Sec.121]. 

The Act also encouraged Amtrak to achieve management efficiencies and revenue 

enhancements. In this regard, it charged the Council with monitoring Amtrak’s efforts to achieve labor productivity improvements and required Amtrak, if it entered 

into an agreement with its union employees after January 1, 1997 involving workrules intended to achieve savings, to report quarterly to the Council both the savings realized as a result of the agreement and how the savings are allocated. The 

Act requires the Council to submit an annual report to Congress that includes an 

assessment of Amtrak’s progress on the resolution of productivity issues or the status of those issues [ARAA Sec. 203]. 

Based on information furnished by Amtrak, it is the Council’s understanding that 

Amtrak has utilized its new flexibility under the Act as follows. 

A. Modifications to the National Route System 

To assist Amtrak in identifying economically attractive route closures and realignments, as well as to assist in overall business planning, Amtrak has developed a 

new strategic planning methodology called the Market Based Network Analysis 

(MBNA). The MBNA has an associated Financial Model that estimates, for alternative packages of rail passenger services and revenues, the expected costs and profitability of a proposed route or system of routes. Using the MBNA to assess its route 

system, Amtrak developed a plan for realignments and extensions of its route sysVerDate Apr 24 2002 09:19 Dec 10, 2003 Jkt 085968 PO 00000 Frm 00041 Fmt 6633 Sfmt 6621 S:\WPSHR\GPO\DOCS\85968.TXT SCOM1 PsN: CAROLT
38

tem, which it called the Network Growth Strategy (NGS). Amtrak announced the 

NGS in late winter of this fiscal year. The Council has not yet had an opportunity 

to fully analyze it since it was not reflected in Amtrak’s FY2000 Strategic Business 

Plan and since many of the NGS actions have not been fully implemented. 

Based on its NGS analysis, Amtrak has proposed to add additional routes and frequencies to its current service. Accordingly, no cost savings have yet resulted from 

the additional flexibility provided Amtrak to determine its national service network 

free from statutory restrictions. After the Council completes its analysis of the NGS, 

it will examine Amtrak’s specific route and service proposals. Under the ARAA, the 

Council is charged with making recommendations for changes in Amtrak’s route 

structure based on Amtrak’s criteria. 

B. Labor Protection Payments 

Amtrak and its unions chose to address the issue of labor protection as required 

under the Act through binding arbitration. In a November 1999 decision, the arbitration board modified the pre-existing employee protective provisions (as regards 

major aspects) as follows:

(a) Under pre-existing law, any affected Amtrak employee was entitled to wage 

and benefit protection for a period equal to the amount of service, not to exceed 6 years; under the arbitration award, an Amtrak employee must have 2 

years of service to be awarded protection.

(b) The maximum duration of employee protective benefits was reduced from 6 

years to 5 years, and employees must have more years of service than previously, on a sliding scale, to reach maximum benefits. For example, an employee with 3–5 years of service would receive 12 months’ benefits; an employee with 20–25 years of service would receive 48 months’ benefits. (According to Amtrak, approximately 20 percent of current Amtrak employees eligible 

for labor protection have more than 20 years of service and would be entitled 

to 4–5 years of income protection for a ‘‘trigger occurrence’’ if unable to exercise seniority.)

(c) The arbitration panel agreed that no employee protection would be required 

for the first 2 years of any new service commenced after the arbitration.

(d) The issue of whether labor protection would apply to the termination of noncommuter contracts for local or state service was remanded for further negotiation and re-submission to arbitration if there is no agreement. (The arbitration panel found that Amtrak had no obligation for labor protection with respect to commuter contracts.) According to Amtrak, the issue remanded is still 

under negotiation and there are open issues that may be resubmitted to the 

arbitration panel.

(e) The ‘‘triggers’’ for the imposition of employee protective benefits remained the 

same: (1) closure of a route or reduction in frequency below 3 round trips per 

week; or, as affects shop employees, (2) closure of a maintenance shop facility 

or transfer of work from the facility to another facility more than 30 miles 

away.

(f) The arbitration award provided that it may be further amended by the parties 

through negotiation after January 1, 2000.

Despite the improvements achieved by Amtrak through the arbitration award, 

Amtrak’s new labor protection obligations to employees, particularly those with 

many years of service, remain significantly higher than those of non-railroad corporations in the United States. No widespread ‘‘trigger occurrence’’ has taken place 

on Amtrak as yet that would give rise to labor protection payments. Should such 

an occurrence take place, there would be cost savings generated by the arbitration 

award modifying Amtrak’s labor protection obligations. 

C. Contracting Out 

As of the date of the Council’s first annual report to Congress (January 2000), 

Amtrak had not undertaken studies to determine whether contracting out any of its 

operations would improve its financial performance. Amtrak also had not served 

Section 6 notices under the Railway Labor Act placing the contracting out issue on 

the bargaining table, which the ARAA required Amtrak to do by November 1, 1999. 

The Council is informed by Amtrak that it served Section 6 notices on June 12, 

2000 placing the contracting out issue on the bargaining table. Amtrak, accordingly, 

considers the contracting out issue to be currently under active negotiation with 

unions representing Amtrak employees. Amtrak considers the specific contracting 

out issues it placed on the bargaining table to be confidential. 

39

1 Indeed, the Council has not been able to find management or benchmarking systems in place 

at Amtrak to measure the productivity of any of Amtrak’s endeavors, not just the management 

of its work force. 

Because Amtrak has not yet contracted out work under the new authority provided in the ARAA, there are no cost savings as yet to be reported. The Act, moreover, puts no deadline on the collective bargaining process with respect to the issue 

of contracting out, nor does it require Amtrak and union representatives to reach 

agreement on the issue of contracting out. 

D. Productivity Improvements 

Amtrak has achieved some changes in work rules in its recent agreements that 

have the potential to result in labor cost savings. Some of the more important 

changes include: contracting out Amtrak’s entire Commissary operations to an outside contractor, eliminating approximately 244 positions through employee buy-outs 

(Amtrak has had statutory authority to contract out its food service operations since 

1981); extension of the period from 4 hours to 6 hours before a second engineer must 

be added to an engine consist (Amtrak estimates that this will permit the elimination of over 50 positions in the short term, and another 30 positions in FY1999 

and FY2000); and providing Amtrak management with additional flexibility to assign work with respect to the implementation of high speed service on the NEC (no 

specific savings calculations provided). 

Under the ARAA, Amtrak is required to report quarterly to the Council regarding 

work rules savings resulting from recent agreements, including how the savings are 

allocated. Under recent agreements, Amtrak’s labor costs have grown by approximately 10 percent above the rate of inflation since 1995. (See May 2000 GAO Report 

‘‘Amtrak Will Continue to Have Difficulty Controlling Its Costs and Meeting Capital 

Needs’’ (‘‘GAO Report’’) at 8.) Amtrak’s stated goal is to partially (20 percent) offset 

recent wage increases through labor productivity improvements. 

Amtrak submitted to the Council a set of numbers on a quarter-by-quarter basis 

stating a ‘‘final’’ total of $21.3 million in ‘‘productivity improvements and work rules 

and cash savings’’ for FY1999. The report did not show how the savings were allocated and provided no analysis of how the numbers were calculated. For the first 

three quarters of FY2000, Amtrak submitted a comparable report stating a preliminary total of $19.5 million in ‘‘productivity improvements, work rule and cash savings from post-January 1, 1997 labor agreements.’’ Similarly, the report did not 

show how the savings were allocated nor how the numbers were calculated. 

As found by both the Council (in its January 2000 report) and the General Accounting Office (in its May 2000 report), there is no way to confirm Amtrak’s productivity calculations nor to distinguish how much the stated savings are instead 

attributable to internal Amtrak departmental budget cuts. Amtrak has no methodology in place by which it can measure work rule savings nor does it maintain an 

audit trail of the information necessary to measure such changes. (See Council Report at 20; GAO Report at 27, n.14). 

Moreover, as further noted by the Council and GAO reports, Amtrak currently 

‘‘does not have standard measures of labor productivity for its different lines of business (e.g., intercity passenger service, commuter service).’’GAO Report at 26; Council 

report at 20. Both the Council and the GAO believe that the development of standard measures of productivity is critical if Amtrak is to control its labor costs (which 

constitute over 50 percent of operating costs).1 Amtrak has stated in response to the 

GAO Report that it intends to develop such measures (GAO Report at 5). 

Under subsection 203(f) of the ARAA, Amtrak is required to make available to the 

Council all information that the Council needs to carry out its duties. The Council, 

in turn, must adopt procedures to protect against public disclosure of confidential 

information. Although the Council staff has negotiated a confidentiality agreement 

with Amtrak, Amtrak has to-date declined to provide Council staff with information 

(particularly relating to labor productivity) that it deems confidential. The Council 

is working with Amtrak to secure additional productivity data and to agree on acceptable methodologies for measuring labor cost savings and monitoring general 

labor productivity. 

Progress Toward Self-sufficiency 

While there is a general understanding among people knowledgeable about Amtrak that Amtrak has made some improvements in its financial and operating performance, and that Amtrak has achieved many of the objectives of its strategic business plan through the first half of FY2000, Amtrak needs to achieve significantly 

greater improvements beginning in FY2001 for Amtrak to achieve operating self-sufficiency by FY2003 as required by the ARAA. 

40

2See Footnote 1

A. Key Points From Recent Audits and Reports by the DOT/IG and the GAO. 

This hearing will undoubtedly hear in detail from Kenneth Mead, the Inspector 

General of the Department of Transportation, about his office’s September 19, 2000, 

report, ‘‘2000 Assessment of Amtrak’s Financial Performance and Requirements.’’

According to an article in last Friday’s Washington Post, Amtrak largely agrees with 

Mr. Mead’s assessment, as does the Council. We would just like to highlight a few 

of the points that report made, from the perspective of the Council. 

Starting from the DOT IG’s point that Amtrak has indeed increased its ridership 

and revenue in 1999 and 2000, but that it must curtail its expense growth to 

achieve operating self-sufficiency in 2003, we would move on to quote 2 points:

• ‘‘Without major corrective action, Amtrak will not achieve operating 

self-sufficiency in 2003.’’ Specifically, Amtrak needs to achieve $737 million 

in savings from undefined management actions, and it needs to achieve its revenue forecasts for Acela Express and other Northeast Corridor service despite 

a revenue risk identified by the Inspector General’s report of $304 million.

• ‘‘Amtrak’s capital outlook is grave.’’ Amtrak will face serious capital shortfalls beginning in FY2001. Even assuming Amtrak’s cash losses are no higher 

than Amtrak projects, Amtrak will face a minimum funding shortfall of $91 million, and continued shortfalls through 2004 will total $298 million. The Council 

thinks it is important to note that this capital shortfall reflects, in part, a less 

than optimal use by Amtrak of its TRA funds.

You also asked the Council, Mr. Chairman, to comment on the May 2000 report 

of the United States General Accounting Office, ‘‘Intercity Passenger Rail, Amtrak 

Will Continue To Have Difficulty Controlling Its Costs And Meeting Capital Needs.’’

This report made a number of findings consistent with the Inspector General’s report and findings of the Amtrak Reform Council.

• While its performance has improved in recent years, from 1995 to 1999, Amtrak’s operating costs were, in total, about $150 million more than planned.

• Amtrak has no measures of labor productivity for its lines of business (e.g., 

intercity passenger service, commuter service) that could help it better manage 

its labor costs.2

• Because future cost increases can be expected, it will be critical for Amtrak to 

achieve the revenue projections for such things as its high-speed rail program 

on the Northeast Corridor.

• GAO estimates Amtrak has short- and long-term capital investment needs totaling about $9.1 billion through 2015 plus additional capital investment needs for 

which costs estimates have not yet been developed.

• GAO recommended that Amtrak develop measures of labor productivity for its 

different lines of business and a multi-year capital plan. Amtrak agreed to these 

recommendations. 

B. Amtrak’s Recent Financial Performance 

Although Amtrak’s actual financial performance as measured by its ‘‘Budget Result’’ was slightly ahead of its Strategic Business Plan projections through the second quarter of its fiscal year (March 31, 2000), Amtrak was $9.5 million below its 

Budget Result after the third quarter (June 30, 2000), and its financial performance 

for the balance of FY2000 is likely to be increasingly unfavorable relative to its 

FY2000 Budget due primarily to shortfalls in passenger and mail/express revenues 

attributable to delays in the introduction of Acela Express service and lower growth 

of mail/express revenues. 

Amtrak’s system revenues increased 7 percent from FY1998 to FY1999, and system revenues were up 11 percent in the first nine months of FY2000 relative to 

FY1999, which was essentially consistent with projected revenue levels in the 

FY2000 Strategic Business Plan. After increasing 2 percent in FY1999 over FY1998, 

ridership was up 3.5 percent during the first nine months of FY2000, but 1.2 percent below the Strategic Business Plan projection. Amtrak achieved its Business 

Plan revenue projections while falling short of its ridership levels due to higher average ticket prices than projected. 

Total system expenses increased 7 percent from FY1998 to FY1999, and they were 

up 7 percent in the first nine months of FY2000 relative to FY1999, which was approximately 1 percent (or $14 million) worse than projected in the FY2000 Strategic 

41

Business Plan. It is important to note, however, in comparing changes in revenues 

and changes in expenses, that since Amtrak’s expenses exceed its revenues by a 

large amount, operating losses were approximately $16 million greater than projected in the Strategic Business Plan for the first 9 months of FY2000 even though 

FY2000 revenues were essentially on Plan. 

Amtrak’s cash losses were $54 million greater in FY1999 than FY1998. Amtrak’s 

cash losses were $27 million (6 percent) lower in the first 9 months of FY2000 than 

FY1999, but they are $22 million (5 percent) behind its Strategic Business Plan projection. 

We believe, together with the Office of the DOT Inspector General and the GAO, 

that while Amtrak arguably has achieved many of its Plan objectives during the 

past 2 years, most the ‘‘heavy lifting’’ in terms of improving the Corporation’s bottom line lies ahead, with even greater need for annual improvements starting in 

FY2001. 

Although the general trend of Amtrak’s financial performance has been improving 

in recent months because of increased ridership—due in part to new services and 

to historic levels of congestion in the aviation system, particularly in the Northeast 

Corridor—the delay of Acela has meant that Amtrak is going to end this year significantly (approximately $75 million) below Plan. 

Where Does the Council Stand and What Does it See? 

Mr. Chairman, in a recent conversation, Senator Lott told me that he wants the 

Council, as part of its statutory duties of making recommendations for improvements, to give the Congress a plan for a new modern national rail passenger system 

and to make sure we include recommendations about how to fund it. In the broader 

context, Mr. Chairman, I think Senator Lott’s request captures the essence of what 

the Congress in the Reform Act asked the Council to do—regardless of whether 

there is ever a need for a finding as to Amtrak’s self-sufficiency. 

After about 18 months of full operations, Mr. Chairman, I feel that this Council 

has come together quite well and that it has developed a solid perspective on the 

situation of intercity rail passenger rail service in America today. 

A. The Situation Today 

Mr. Chairman, we are now looking at a domestic intercity transportation picture 

that for the first time in many years, actually needs the rail passenger mode in 

many important transportation markets in this nation. Air and road congestion in 

critical city pairs and regions have brought us to this position. 

The States, or at least a significant number of them that are faced with the need 

to find additional useful intercity transportation capacity, are being aggressive in 

their pursuit of opportunities for improved intercity rail passenger service. 

The Council also sees a federal government—both executive and legislative—that 

has:

• Provided Amtrak, which by law is now a private, federally-chartered District of 

Columbia corporation, as the sole national instrument for operating and improving intercity rail passenger service in this nation today; and

• Designated 11 emerging high-speed rail corridors—to go with 2 already-established corridors (the Northeast Corridor and New York’s Empire Corridor). 

B. Amtrak Today, as Analyzed and Reported by the Council 

Amtrak is a conglomerate, trying to carry out many major functions in addition 

to its core mission. That mission is to operate a national system of intercity rail passenger, mail and express services, which is what Amtrak was established to do. 

In the Acela delay, which it now seems may be coming to an end, Amtrak is facing a critical obstacle to self-sufficiency. But it is important to note that Acela—even 

if it achieves the results that Amtrak forecasts—will provide significantly less than 

half of the financial performance improvements that the DOT IG’s report says that 

Amtrak needs to achieve. 

Its Northeast Corridor infrastructure is also a problem. The Council has recommended that Amtrak keep separate financial statements on it. If it were a separate corporate division of Amtrak, it might be able to raise its own funds in capital 

markets. 

Amtrak has had, and continues to have, major problems achieving improvements 

in all areas of productivity, including its use of capital, labor, and materials. That 

said, the Council does not regard labor as the problem at Amtrak. The real problem 

is the overall structure of the corporation’s management, exacerbated by inadequate 

information systems, and a lack of accountability—division by division and function 

by function—for bottom line results. Amtrak is also subject to substantial and conVerDate Apr 24 2002 09:19 Dec 10, 2003 Jkt 085968 PO 00000 Frm 00045 Fmt 6633 Sfmt 6621 S:\WPSHR\GPO\DOCS\85968.TXT SCOM1 PsN: CAROLT
42

3The Council believes passenger equipment can be funded in large part by the private sector. 

tinuing political interference, which seriously hampers its ability to operate like a 

business. 

Amtrak operates a fleet of passenger cars that is too old and too small. It needs 

new equipment to provide better service that will attract new riders and haul more 

mail and express traffic. The Council believes that much, if not all, of this equipment should be able to be financed by private capital markets. 

It needs better infrastructure on which to operate, both in the NEC and throughout the other 12 corridors. But this is far from just Amtrak’s problem. 

To do all this, our nation needs a new system of financing for rail passenger service, which means that the government should put on its policy hat and design one 

for it, looking both at infrastructure and equipment and the roles of government financing and private capital markets. 

This brings me to the question as to how the proposed bonds fit into all of this. 

The Proposal to Authorize Special Bonds to Finance High-speed Rail Investments 

When the Council was asked by the Senate Commerce Committee to testify at 

this hearing on Amtrak issues, including providing the Council’s views on the proposed ‘‘High Speed Rail Investment Act’’ (S.1900 and H.R. 3700), I directed the staff 

to send a memorandum to all Council members to determine the views of each 

Council member as to whether the Council should support or oppose the passage 

of this legislation. The results of the poll are as follows. Nine of the eleven Council 

members supported the proposed legislation with certain modifications: (1) the 

Bonds can be issued by ‘‘an intercity passenger rail carrier,’’ which would include 

state high speed rail authorities, not just by Amtrak; (2) priority should be given 

to use the Bond funding for infrastructure only, and should only be used for equipment if private financing is not available 3; and (3) Bond funds be segregated from 

the operating bank accounts of Amtrak and other intercity passenger rail carriers’ that might issue Bonds, and not be treated as fungible assets of these corporations. 

(This would be a change from the way that Amtrak dealt with the Taxpayer Relief 

Act funds in terms of interim use and investment.) Several Council members believe 

that the Council has no business taking a position on certain tax-related issues that 

are more appropriately issues for others to determine. An example of such issues 

are the Department of the Treasury’s current limitations on private activity tax-exempt bonds and requirements that proceeds from tax-exempt bonds be expended 

within 3 years of the time that tax exempt bonds are issued by the States. [A summary of the specific issues proposed to the Council members as part of their ‘‘vote’’ is found at Attachment I]. 

The 2 remaining members had different positions. Mr. Moneypenny, the Presidentially-designated member representing the views of rail labor, expressed the 

view that the Council should not take a position on the bonds. The Administration 

indicated that it was in the process of determining its position and that, when its 

position was determined, it would so advise the Council. As of the time of the submission of this testimony to the Committee, the Council had not received notice of 

the Administration’s position. We are treating that as a temporary abstention. 

Mr. Chairman, should these bonds not pass in this session of the Congress, it is 

likely that other ways could be found to finance high-speed rail, including the federally-designated high-speed rail corridors. Such proposals might best be developed, 

I believe, from a well-considered effort by experts in transportation policy and finance to determine a modern Intermodal Surface Transportation Policy and an accompanying array of financing mechanisms needed to fund improvements in intercity passenger rail infrastructure and equipment. The Council will be ready to participate in any such discussion and debate about how to best do the job. This effort 

would have to start with a comprehensive capital needs plan, which Amtrak has not 

provided, aside from its 25-year estimate of capital needs for the south end of the 

Northeast Corridor. 

Is $10 billion needed? Without a doubt. And considerably more, in fact, if we are 

serious about improving and expanding intercity rail passenger service. The Reform 

Act charges the Council with a positive mission—to recommend improvements in 

Amtrak and, if Amtrak cannot improve to the extent the Congress requires, to design an improved national intercity rail passenger system. The Council was established to determine the best way to improve our national rail passenger system, and 

we see the need for a major investment in passenger rail service over the coming 

years. Assuming that, in some form and at some time, $1 billion per year for Corridor Development is provided, that amount could easily be matched by as much as 

$1 billion per year for other needs. These other needs include additional funding for 

43

the NEC and the emerging corridors, enhancements to the current national rail passenger system and to Amtrak’s mail and express operations, and implementation of 

the Network Growth Strategy. 

Let me preface all this by saying that—on behalf of the Council—I think we would 

not be doing our duty as an independent oversight agency if we did not point one 

thing out. The reason we are we are all facing the very difficult issues that these 

bonds pose—and here I quote from the Council’s first annual report—is that:

‘‘Unlike roads and air, however, neither local or state governments nor the federal 

government have determined an institutional and financial solution for adding the 

track and equipment capacity to provide an expanded system of intercity rail passenger service. The privately-owned rail freight rights-of-way present unique 

issues compared to the publicly-owned and publicly-funded national systems of 

highways, airports, and airways. Rail rights-of-way, unlike other modes of transportation, do not have a stable funding mechanism for rail passenger corridor development.’’ (Amtrak Reform Council, First Annual Report, January 2000, p.1)

So we should realize that—under our current transportation policy—we are using 

Amtrak to do what in other modes is done by 2 separate and separately funded 

types of organizations, one focusing on infrastructure, and one focusing on transport 

operations. The first is exemplified by the roles of the Federal Highway Administration operating in concert with the state highway departments, the Federal Aviation 

Administration, and the Corps of Engineers. The role of transport operations is— in all of these other modes—carried out by operating companies that carry passengers, mail, and express. Companies in modes other than rail are not entangled 

with huge infrastructure funding burdens; they pay a user fee for the infrastructure 

and focus their attention on serving the traveling public. 

I know Mr. Chairman that this Committee is much concerned with the problems 

of the aviation system today, and we each have our own stories about the stress 

of contemporary airline travel. But the problems of the airlines and the aviation system are the problems of success. Each year for the past 3 years the airlines have 

been adding more intercity passengers than Amtrak carries annually in total. And 

they have been adding each year as many or more employees than Amtrak’s total 

complement of agreement employees. 

The question the Council is asking is ‘‘What is the best way to get rail passenger 

service to begin to share in the economic bonanza that is causing problems for air 

and highway travel?’’ Against this backdrop, the Council’s concern with this legislation has 2 dimensions—policy and practicality. 

From an overall policy standpoint, has this approach really been thought through 

thoroughly? Is the mechanism of these bonds, aside from the matter of who issues 

them, the best way to finance passenger rail capital needs? I would think that it 

depends on what part of those needs you are looking at. It is almost certainly not

a sound way to fund the capital needs of Amtrak the corporation. But it might well 

be a reasonable way to fund long-term infrastructure improvements to the 

FDHSRCs. That raises these specific policy issues:

1. Is Amtrak the corporation, from all standpoints the best vehicle for issuing 

these bonds?

• It does have about $5 billion in Net Operating Loss Carryovers (NOLs), but 

these exist because historical government subsidies were made in the form of 

preferred stock investments in Amtrak by the government, which arguably 

should have been characterized as operating grants rather than capital investments.

• What about Amtrak’s balance sheet? Should it be burdened with $10 billion 

in debt (or contingent liability debt) for improvements to the infrastructure, 

most of which it does not own? What will this do to Amtrak’s ability to borrow 

in private markets?

• Should we be loading major program and financing responsibilities on a corporation which is clearly having difficulties getting its core business to run 

well, and which is facing the need to achieve self-sufficiency by December 2, 

2002?

2. Has there been a clear assessment of the best potential roles of public financing 

and private capital markets?

3. And finally, has there been any solid attempt to determine the best possible 

way for money to be put into the infrastructure improvements of America’s private railroads in order to provide the capacity and speed improvements needed 

44

1 Amtrak has indicated that it is willing to be bound by the additional restrictions of H.R. 

3700 (no more than 30 percent of funds invested in any corridor; explicit statement that there 

to implement the Federally-Designated High-Speed Rail Corridors? [Attachment II shows that, under the most favorable assumptions, over 30 years the 

taxpayers (federal and state) will pay at least $15 billion (and possibly as much 

as $18 billion) for $10 billion of high speed rail projects].

The proposed bond mechanism in effect uses Amtrak as a sort of Fannie Mae for 

the infrastructure of the railroad industry. One reason for the choice is clear—the 

$5 billion in NOLs that the corporation holds because of the subsidies it received 

previously from the government. These NOLs shelter the escrow Fund’s taxable interest income needed to grow on a compounded basis and be available in 20 years 

to repay the bonds. 

This is where issues of practicality come in. In the event that the Congress decides to pass the bond bill in this session, the Council believes that it should be done 

with the following amendments:

(a) The funds primarily should be used for infrastructure improvements, with 

90 percent for the FDHSRCs and 10 percent for non-FDHSRCs (the 10 

percent should be allocated to non-Corridor states by DOT) and should 

only be used for equipment expenditures if private-sector financing of 

equipment is not available;

(b) There should be adequate criteria for evaluating and assigning priority to 

the candidate projects, with DOT and the states playing the major role in 

the initial selection of projects. Amtrak should not be in the business of 

choosing projects outside the NEC. Assets outside the NEC are not Amtrak’s assets, nor does Amtrak have a monopoly to provide rail passenger 

transportation in those areas;

(c) Effective oversight arrangements need to be in place for the projects to be 

funded by the bonds;

(d) All funds, including both state contributions and bond proceeds, should be 

under the control of the Independent Trustee and should not be able to 

be borrowed by Amtrak (or any other issuer), or otherwise be entangled 

with its internal finances. To do so would be to create a risk of having 

the proceeds entangled in the internal finances of the issuer in a way that 

could put the bond proceeds and the bond escrow account at risk in the 

event of creditors’ claims (in Amtrak’s case, this would include the risk of 

default on its commercial debt obligations that Amtrak, in Appropriations 

testimony, has stated that it could indeed face). Moreover, discussions the 

Council’s staff has had with financial experts experienced in bonds indicate that, when the prospectuses for these Bonds are issued, if Bond proceeds are to be mixed with Amtrak’s internal funds, it could raise the perceived financial risks of the Bonds.

Mr. Chairman, thank you again for your invitation to the Council. The issues you 

and the Committee are addressing are critical to the future of rail passenger service 

in this country, which we all want responsibly and effectively to promote. 

Attachment I 

Background Paper on Proposed Changes Accepted and Under Discussion 

to S. 1900 and H.R. 3700

I. Issues Discussed With Amtrak and FRA, Annotated by Later Changes from the 

Senate Budget Committee Meeting 

The Council staff met with Sandra Brown (Vice President, Government Affairs) 

and Bill Erkelenz (legal counsel) of Amtrak and Mark Yachmetz (Associate Administrator for Railroad Development, Federal Railroad Administration). Ken Kolson followed up by telephone on August 24 with Bill Erkelenz. On September 8th, the 

Council staff met with Mitch Warren of the Senate Committee on the Budget 

(SCOB). 

A. Update on the Status of the Legislation. Amtrak indicated that ongoing legislative discussions surrounding the High Speed Rail Investment Act are now based on 

the text of H.R. 3700, not S. 1900; that Senator Lautenberg has agreed to the more 

restrictive provisions of H.R.3700 1; and that Amtrak has agreed to support certain 

amendments and clarifications to H.R.3700, which are summarized below: 

45

is no federal guaranty of the bonds; and any ‘‘intercity passenger rail carrier’’ can issue the 

Bonds, not just Amtrak). 2 Although only 10 percent of the proceeds of an issue each year can be used to improve nondesignated high-speed corridors under the language of the bills, Amtrak interprets the language 

as allowing the Alaska Railroad to issue bonds for 10 percent of the maximum allowable $1 billion cap each year. Senator Stevens reads it this way too. 3 Amtrak noted that states can put up their 20 percent shares of funding by issuing general 

obligation tax-exempt bonds (but the states presumably would prefer to issue project financing 

bonds since such bonds are not full faith and credit obligations of the states). Amtrak also noted 

that the current IRS Code allows States to issue tax-exempt project financing bonds for highspeed train facilities as long as such trains can travel at speeds of 150 mph or faster for appropriate portions of their trips. 4Mark Yachmetz noted during the meeting that in the approximately 19 years that funds 

were administered by the Northeast Corridor Improvement Project, first year funds expended 

never exceeded 15 percent, and only twice did first year funds expended exceed 10 percent.

1. Amtrak would support the House language that (a) would allow rail passenger carriers other than Amtrak (including specially-established State entities) to issue Bonds and (b) would place a 30 percent cap on proceeds that 

could be used for any corridor, including the NEC. Amtrak noted its interpretation that the Alaska Railroad was qualified to issue bonds.2 In the Budget 

Committee meeting, Mr. Warren indicated that the issue of additional potential issuers of the bonds had been augmented by a proposal from railway 

labor that Davis-Bacon provisions apply to all projects, regardless of the 

issuer. 

2. Amtrak would support statutory criteria for Amtrak and DOT to apply in selecting projects (criteria similar to those used by the Federal Transit Administration in approving transit grants). Amtrak also would support oversight 

and greater participation by the Secretary of Transportation or the DOT Inspector General in the process of selecting projects to receive Bond funding. 

Mr. Warren of the Budget Committee indicated that work was underway to 

develop criteria.

3. Amtrak would support adoption of provisions providing for federal and state 

oversight of the projects funded and amounts expended by Amtrak under the 

Bond program, possibly using as guidance the project management oversight 

process from the transit industry with a private PMO (‘‘Project Management 

Oversight’’) contractor making sure that the funds are expended according to 

the applications and grant agreements executed between Amtrak and the 

States.

4. Amtrak would support legislation clarifying that States could use tax-exempt 

project revenue bonds to fund the States’ 20 percent matching contributions 

in whole or in part.3 This provision could encounter U.S. Treasury Department opposition since it may open the door for others also to get implicit federal subsidies by getting authority to issue more tax-exempt project financing 

bonds. 

5. Amtrak agreed to have a capital plan in place before any bonds are issued. 

Although Amtrak did not provide the specifications of the promised capital 

plan, Amtrak seemed to suggest that it would provide a five-year capital plan 

rather than a longer-term plan. It is expected that Amtrak’s capital plan 

would be issued before the end of September.

6. Amtrak believes the 36-month period to make qualified expenditures may not 

be sufficient because it will take time before projects can get underway (particularly with a requirement for DOT approval of project plans, and possible 

requirements for Environmental Impact Statements). Chairman Shuster informed Amtrak that he thinks the 36-month period is too short. FRA noted 

that its experience with the Northeast Corridor Improvement Project supports the need for a longer spend-out period.4 Amtrak anticipates that approximately 20 percent of each years’ bond funds will be invested in the years 

that the bonds are issued. In the Budget Committee meeting the issue was 

raised that Treasury regulations do not permit longer than 3 years between 

issuance and expenditure for the project to be financed. 

7. Amtrak reads the language of the bills as requiring a State to put up its 20 

percent match in cash (not just to make a written commitment) prior to the 

issuance of any Bonds.

8. Amtrak noted that the issue of who will manage a project must be resolved 

in each case. The entity that would manage the project would be specified 

46

5Legal structures can isolate the Escrow Fund from Amtrak, but in an Amtrak bankruptcy 

proceeding, creditors of Amtrak could argue that the Escrow Fund should repay Amtrak (a) for 

the value of any principal payments made with Amtrak funds pursuant to Amtrak’s guaranty 

of Bond principal within 3 years of an Amtrak bankruptcy, and (b) for the value of Amtrak tax 

losses used by the Escrow Fund to shelter interest income from federal and state income tax 

liability within 3 years of an Amtrak Bankruptcy. 6 Amtrak’s audited financial statements report a NOL carryover balance of $8.4 billion as of December 31, 1998, less a $3.3 billion reduction in fiscal year 1999 due to the funding received 

under Taxpayer Relief Act of 1997. Since the Net Operating Loss (NOL) Carryovers represent 

losses funded by federal investment in Amtrak, primarily through the purchase of preferred 

stock, this approximately $5 billion of NOL Carryovers may not be available in the future if 

there is a financial recapitalization of Amtrak. Furthermore, depending upon the income tax 

treatments appropriate for future federal and state funding mechanisms, Amtrak may not generate sufficient taxable losses in the future to fully offset the interest income earned by the Escrow Fund. 7The 5 percent could also allow the bonds to be sold at a small discount to their par value 

and still satisfy the statutory requirement that at least 95 percent of the proceeds are used for 

qualified investments.

in agreements among Amtrak, the states, and any freight railroad that might 

be involved.

9. Amtrak will take legal measures, to the extent possible, to insulate the funds 

held by the independent trustee (in what Amtrak calls an Escrow Fund) from 

Amtrak’s creditors; Amtrak does not envision that a separate taxable entity 

will be created; Amtrak will pick the independent trustee using a competitive 

process similar to the one used to select the advisor to invest the TRA funds; 

and Amtrak expects that the bonds will be paid off through Guaranteed Investment Contracts (GICs) purchased by the trustee. Amtrak’s legal counsel 

said that, if necessary, perhaps the Escrow Fund could be placed in a Grantor 

Trust to isolate it from Amtrak’s general creditors, while allowing Amtrak’s tax attributes to be used to shelter taxable income otherwise earned by the 

Escrow Fund.5

10. When asked about how income taxes on Escrow Fund interest earnings 

would be paid (which Amtrak anticipates will be taxable for income tax purposes), Amtrak offered its remaining approximately $5 billion of Net Operating Loss Carryovers 6 as well as future losses (due to depreciation, etc.) to 

be available to shelter any taxable interest income. Presumably, the same 

Amtrak losses would be available to shelter any taxable interest earnings resulting from temporary investments of the Bond principal of $1 billion per 

year until the funds are expended for qualified, approved projects. 

11. The 5 percent of the proceeds that can be used for non-qualified project expenditures is expected by Amtrak to be used for ‘‘soft costs’’ (e.g., transaction 

costs; funds for oversight of projects [Project Management Oversight similar 

to that used for projects funded with transit grants, as proposed by OMB and 

DOT/IG] and other set-asides to ensure that no issue arises regarding the 

qualification of the Bonds).7

B. Other Issues Discussed. In addition to the above issues, which Amtrak represented as likely legislative amendments, other issues related to the Bonds were 

discussed, as indicated below:

1. When asked if certain types of project expenditures such as progressive overhauls could be funded with Bond proceeds, Amtrak indicated that they theoretically could. Amtrak, however, did not anticipate that the States would 

agree to use Bond funds for progressive overhauls. The FRA concurred, stating that although the States may approve using Bond funds and may provide 

matching State funds for capital expenditures on a Generally Accepted Accounting Principal (GAAP) basis (i.e., new, long-term assets or expenditures 

which rebuild or significantly increase the useful lives of assets), approving 

Bond funds for progressive overhauls was not likely.

2. Amtrak anticipated that the DOT or some other federal agency would have 

to approve project applications before Bond funds would be made available. 

As a result, both Amtrak and Mark Yachmetz did not think that Bond funds, 

unlike TRA funds, would be used for purposes that did not advance highspeed rail passenger service.

3. Freight railroads and other entities that benefit from the Bond funding would 

have to agree to certain requirements and restrictions pertaining to use and 

maintenance of the assets funded throughout the life cycle of the assets (FRA 

47

8 Attached to this memorandum are analyses which show the amounts that need to be earned 

to repay Bond principal in 20 years with Bond funds (1) immediately spent on qualified project 

expenditures, and (2) invested for a period of time before being spent on qualified project expenditures. These attachments, showing both after income tax and before income tax cases, confirm Amtrak’s assertion that an after-tax (or tax exempt) interest rate of approximately 6.25 

percent for 20 years will be sufficient for the Escrow Fund to repay the loan principal in 20 

years.

noted that there needs to be an agreement with the freight railroads in place 

prior to approval of the project and issuance of the Bonds).

4. The bills do not spell out how the Bond fund proceeds can be invested by 

Amtrak for the 36-month (or greater) temporary period before they are used 

to pay for qualified project expenditures. Amtrak intends to invest the money 

in high-yield investments, the earnings from which would go into the Escrow 

Fund to pay off the bonds. Amtrak estimates that the Escrow Fund will have 

to earn a rate of return of approximately 6.25 percent (rather than the 8.38 

percent rate calculated by the Council staff, which assumed that Bond principal would be immediately spent on qualified project expenditures). This is 

because Amtrak assumes that a maximum of 20 percent of the bond funds 

will be expended in the first year, not more than 40 percent in the next year, 

with the balance presumably being spent in the third and following years. 

Before the funds are used for project expenditures, the interest earnings on 

the invested Bond principal will go into the Escrow Fund, allowing a lower 

rate of return to be required on the 20 percent State matching funds in the 

Escrow Fund.8

5. When asked, Amtrak agreed that, under the language of the current bills, 

it could borrow the money for all or part of the 36-month ‘‘temporary investment’’ period at a stated rate of interest and deposit the interest payments 

in the Escrow Fund. Amtrak indicated that, prior to this question, no one 

in the Corporation had given any thought to Amtrak’s borrowing the funds 

temporarily.

6. Amtrak interprets the bills as allowing a freight railroad to reimburse a state 

for all or part of the 20 percent match. Amtrak (and DOT) believe that any 

benefit to a freight railroad in improving its infrastructure in a high-speed 

corridor would also benefit Amtrak and intercity passenger service, even if 

only indirectly.

7. Mark Yachmetz noted that DOT was in discussions with Amtrak about the 

bills, but, as of August 23, DOT had taken no position yet. DOT may endorse 

the bills (with certain amendments), or it may not. After the meeting, he 

noted to the ARC staff that H.R.3700 was likely to be the last legislative opportunity to fund high-speed rail development projects until FY2003.

II. Staff Suggestions for Improvements to Amendments Proposed and Description of 

Further Amendments Believed to be Needed 

After reviewing the improvements in the proposed legislation as discussed with 

Amtrak and DOT, the Council staff believes that some of the proposed amendments 

need strengthening and additional conditions should be imposed. 

A. Suggested Improvements to Proposed Amendments.

1. There should be clear investment criteria for the Secretary of Transportation 

to use in prioritizing and approving projects, and Amtrak should be made subject 

to DOT reporting requirements regarding project expenditures. It would be preferable for the Secretary of Transportation to make decisions that will shape the Nation’s future passenger rail infrastructure. In addition:

• There should be incentives for the states to increase the percentage of matching funds contributed to financing projects funded with the Bonds; this should 

be one of the criteria used by the Secretary in reviewing and assigning priorities to projects submitted for approval (Amtrak and DOT noted that this 

issue was currently under discussion, and this issue is a high priority for the 

Senate Budget Committee);

• There should be incentives in place to obtain contributions from freight railroads that are beneficiaries of bond-financed projects (DOT and the Senate 

Budget Committee are also working on this issue).

2. Capital improvements should meet the standards of Generally Accepted Accounting Principles. The bond proceeds would therefore be used only for capital exVerDate Apr 24 2002 09:19 Dec 10, 2003 Jkt 085968 PO 00000 Frm 00051 Fmt 6633 Sfmt 6621 S:\WPSHR\GPO\DOCS\85968.TXT SCOM1 PsN: CAROLT
48

penditures for projects funding infrastructure improvements or equipment. Amtrak 

operating expenses, such as progressive overhauls or preventive maintenance, would 

not be eligible.

3. Amtrak should be required, on a permanent basis, to incorporate a rolling fiveyear capital investment expenditure plan into its Strategic Business Planning process (‘‘rolling’’ means that the investment expenditure plan would be updated each 

year for the next 5 years as part of Amtrak’s normal business planning process).

4. In addition to the language of H.R. 3700, which permits Amtrak and other 

intercity rail passenger carriers to issue Bonds, bona fide high-speed rail authorities 

should also be permitted to issue the Bonds. Rail labor has proposed that DavisBacon provisions should apply to projects financed by any issuer of the bonds. 

B. Additional Conditions That Should Be Considered 

1. DOT should be required to maintain annual oversight of the state of good repair of the assets improved with investment funds:

• Freight railroads should be required to issue reports concerning how the 

funds were expended and demonstrating that they have performed normalized maintenance on the segments improved with Bond funds.

• Amtrak should be required to provide annual reports on the financial and 

physical state of good repair of the NEC infrastructure, including improvements made with bond funds.

2. To ensure that Bond proceeds are not mixed with Amtrak’s operating funds in 

any way that could entangle the proceeds with any future creditors’ claims, all Bond 

proceeds and state contributions should be placed in separate accounts within the 

Escrow Fund controlled and managed by the independent trustee. The temporary 

investment of the Bond funds should be limited to AAA investment grade securities, 

possibly limited to federal government obligations.

3. The statute should require that, within the $3 billion allocated to the NEC, the 

highest priority is to correct the remaining fire and life safety problems in Penn Station New York and its associated complex of tunnels. At a minimum, safety should 

be a principal criterion for the DOT to use in assigning priority to and selecting 

projects.

4. States should have the right to inspect Amtrak’s financial records for Bondfunded projects. 

III. Impact of Changes Accepted by Amtrak and Those Yet to Be Considered in the 

Bills 

In looking at the process that has occurred during the past few weeks since the 

hearing by the House Ways and Means Subcommittee on Oversight, it seems that:

1. If, indeed, the bonds are intended to fund only the infrastructure improvements 

of the federally-designated high-speed rail corridors (the FDHSRCs, which, includes 

the Northeast Corridor, the Empire Corridor, and the 11 emerging high-speed rail 

corridors designated under ISTEA and TEA–21), there is probably a better way to 

structure an infrastructure improvement program (e.g., a federal-state variant of the 

NECIP program in which FRA, with assistance from FHWA, would work with the 

state DOTs and the freight railroads to upgrade infrastructure).

2. If this were the only vehicle that would ever be possible for funding the corridors, additional amendments should be considered (as discussed in Section II) that 

would ensure:

(a) Funds could only be used for infrastructure improvements to the NEC and 

the FDHSRCs (plus the 10 percent for non-FDHSRCs, which should be allocated by DOT);

(b) Adequate criteria be in place for evaluating and assigning priority to the 

projects, with DOT playing a direct role in initially choosing projects. Amtrak should not be in the business of choosing projects outside the NEC. Assets outside the NEC are not Amtrak’s assets, nor does Amtrak have a monopoly to provide rail passenger transportation;

(c) Amtrak should not be eligible to manage projects, except in the NEC, and 

only there with the agreement of the participating states;

(d) Effective oversight arrangements be in place; and

49

(e) All funds, including both state contributions and bond proceeds, be under the 

control of the Independent Trustee and cannot be borrowed by Amtrak or 

otherwise be entangled with Amtrak’s internal finances.

The overall impact of these changes would be to convert the original bills, which 

appeared to be very simple instruments for providing blanket authority without a 

well-defined program objective or adequate restrictions for Amtrak to issue Bonds 

(based on Amtrak’s exclusive comparative advantage of having about $5 billion in 

NOL tax carryforwards), to a bill designed to ensure that the Bonds would be used 

to fund the infrastructure improvements necessary to develop the FDHSRCs. The 

Council staff believes that a better approach would be to start with a programmatic 

bill designed effectively to fund the infrastructure improvements needed for the 

FDHSRCs and then to meld onto it any tax provisions that might be best-suited to 

finance the corridor development program. 

The Council clearly stated in its First Annual Report that it believed that Amtrak 

was trying to perform too many functions to the detriment of its ability to operate 

a truly effective intercity passenger train operating company, and that, accordingly, 

major responsibilities in such areas as infrastructure improvement should be left to 

others. This view undergirds our assessment of the proposed Bond legislation. 

50

The CHAIRMAN. Thank you, Mr. Chairman. We have a vote on. 

I suggest we take a brief recess and go vote and come right back. 

[Recess.] 

The CHAIRMAN. The Committee will reconvene. I thank the witnesses for their patience while we went over and had a vote. 

Our next witness, and our next-to-last witness, is Mr. Joseph 

Vranich. Welcome, Mr. Vranich. 


926car1.eps
51

STATEMENT OF JOSEPH VRANICH, IRVINE, CA 

Mr. VRANICH. Thank you, Mr. Chairman. Good morning to you 

and your colleagues. I appreciate the opportunity to testify before 

you today. 

I am accompanied here by Mr. Anthony Haswell, who is seated 

in the audience. He founded the National Association of Railroad 

Passengers in 1967. In 1970 he hired me to be its executive director, and Mr. Haswell is an attorney who is occasionally referred to 

as the father of Amtrak. He is here, and he agrees with the overall 

thrust of my testimony. 

Although this marks the 31st year that I have been a proponent 

for rail service, I am now embarrassed to admit that I worked to 

create Amtrak. I served as a member of the congressionally chartered independent Amtrak Reform Council, a post I was appointed 

to by the Senate Majority Leader on February 24, 1998. 

Amtrak has made performing the oversight functions unduly difficult, if not impossible for the Amtrak Reform Council. As such, 

I believe the Council is unable to effectively fulfill the oversight 

role that Congress intended for it, and that there is no realistic 

prospect it will be able to do so in the foreseeable future. Thus, I 

resigned my position effective July 10 of this year. 

Amtrak has obstructed the Council regarding several very impor- tant issues. How is Amtrak spending its $2.2 billion Taxpayer Relief Act funding? The Council is required to turn a report in to the 

Congress about that. What is the revenue and cost picture for Amtrak’s freight program? They call it express. I call it freight, because it slows the trains down. 

Another issue is what steps Amtrak is taking to improve productivity? Again, the Council is required to present a report to Congress on that. These issues are covered in detail in my prepared 

testimony, which includes a chronology of when we asked Amtrak 

questions and the questions Amtrak either inadequately responded 

to or did not respond at all. 

I would like to say something about procedures. In the Council, 

we understand the sensitivity of delving into Amtrak’s affairs. The 

Council established procedures to ensure against the public disclosure of information that is a trade secret, or commercial or financial information that is privileged or confidential. Council members 

voluntarily signed ARC-developed confidentiality agreements. Amtrak declined to accept those and demanded that members sign an 

Amtrak-written confidentiality agreement. 

All Council members signed the second agreement. Despite the 

Council’s good faith demonstration that proper safeguards were in 

place, Amtrak nevertheless declined to provide germane or timely 

information in many cases. 

Incidentally, one of the questions I was dealing with is, what is 

your rate of return on these capital projects that you have that you 

are financing out of the Taxpayer Relief Act? Amtrak basically told 

me, we do not calculate that for most of our projects. 

I want to volunteer that when I worked in Amtrak’s public affairs department, which admittedly was some time back, it was 

back in the 1970’s, I was a member of what was called the Passenger Service Committee. We reviewed capital projects based on 

estimated rates of return, and we recommended projects to the 

52

board of directors for approval. It is beyond belief that Amtrak’s 

large bureaucracy in the 1990’s and now 2000, one that relies extensively on computer accounting systems, is unable to produce 

data that Amtrak’s much-smaller staff without computers compiled 

in the 1970’s. 

I have been a high-speed rail proponent for many, many years. 

Regarding the High-Speed Rail Investment Act, Amtrak is torturing the English language to redefine what constitutes a highspeed train. This is most pronounced for trains in the Southeast, 

Midwest, and West, where after money is spent most of the trains 

will still run at rather ordinary speeds. Hence, the legislation will 

do virtually nothing to bring about true high-speed trains, demonstrating once again that Amtrak’s management and organizational culture are poorly suited to develop truly advanced train systems. 

One of the arguments for high-speed rail is that we can divert 

passengers from air travel to trains, thereby freeing up slots at 

congested airports. But after upgrading, Amtrak trains will still be 

insufficient to the task of competing with air travel. This is outside 

of the Northeast Corridor. 

Also, Amtrak may spend funds on routes that are excessively 

long, such as Washington, DC, to Jacksonville, Florida, where there 

is no way, no way, not now and not ever, that even the fastest 

high-speed trains could compete with air travel. No executive I 

have ever met on a single high-speed rail operation overseas, and 

I have met many, many of them, not one of them has ever proposed 

a route that long at 753 miles, where high-speed rail’s effectiveness 

basically falls after a distance of 300 miles. 

For these reasons, Amtrak’s claim that this bill will help ease 

aviation congestion is unscrupulous. I doubt that the program will 

result in the elimination of a single flight from our busy air system, 

and incidentally I noticed an earlier comment about a number of 

organizations supporting this bill, and Amtrak’s long listing. 

One place is the city of Grand Forks, North Dakota. With all due 

respect to the people of that fine community, it boggles my mind 

that they would endorse a high-speed rail bill, because North Dakota does not have the population density of a route like TokyoOsaka, or Berlin-Hamburg, or any of these places where high-speed 

rail plays a role. So I can only wonder and imagine what kind of 

representations were made to the city of Grand Forks to get them 

to sign on as an endorser to this legislation. 

Cost estimates are virtually nonexistent for these upgrades. I 

have been involved in private proposals for high-speed rail. We 

hold private companies up to excruciatingly painful standards 

when they develop high-speed rail proposals, but we are creating 

a standard here for Amtrak that is excessively loose. We have no 

cost estimates. We have no rate of return calculations. We have no 

credible estimates of ridership or revenue that will result from this 

bill. The conclusion I have reached is that the bill should not pass. 

I would like to conclude by saying that I think Congress should 

take a closer look at Amtrak and demand real accountability on a 

number of scores, and while I offer a number of legislative recommendations which are outlined in my full testimony, I would 

highlight one here. 

53

One recommendation is that I think Congress, in amending the 

ARAA the next time, should establish penalties for Amtrak’s failure to cooperative with the Amtrak Reform Council. 

Mr. Chairman, that concludes my testimony. I will be happy to 

answer your questions. Thank you. 

[The prepared statement of Mr. Vranich follows:]

PREPARED STATEMENT OF JOSEPH VRANICH, IRVINE, CA 

Good morning, Mr. Chairman and distinguished Members of this Committee. My 

name is Joseph Vranich and I appreciate the opportunity to testify before you regarding Amtrak. Because of time limitations, I will summarize my prepared testimony. 

I have no employer or client involved in transportation today. Thus, I speak as 

an independent voice. I am accompanied here by Mr. Anthony Haswell, who is seated in the audience. He founded the National Association of Railroad Passengers in 

1967. In 1970, he hired me to be its executive director. Mr. Haswell is an attorney 

who for many significant reasons is referred to as the ‘‘father of Amtrak.’’ He agrees 

with the overall thrust of my testimony. 

Although this marks the 31st year that I have been a proponent for rail service, 

I am now embarrassed to admit that I worked to create Amtrak.

• The Amtrak I and others envisioned would design a flexible system attuned to 

contemporary need and demand, adjusting and fine-tuning its services to carry 

people where they are willing to travel by train. But we do not have that with 

today’s Amtrak.

• The Amtrak we envisioned would be demonstrating leadership in bringing 

about true high-speed trains to America. But we do not have that with today’s Amtrak.

• The Amtrak we worked to create would be one that would give passengers priority over freight. But we do not have that, either.

Instead, what we have is an underperforming Amtrak that remains a candidate 

for liquidation. 

My most recent relevant position was as a member of the Amtrak Reform Council, 

a post I was appointed to by the Senate Majority Leader on February 24, 1998. 

When I was appointed, Senator Trent Lott said, ‘‘The ARC will ensure that Amtrak 

spends the taxpayers’ money wisely. The Council’s first loyalty will be to the American taxpayer.’’ Note the responsibilities under the Amtrak Reform and Accountability Act of 1997 (ARAA), subsection 203,

Amtrak shall make available to the Council all information that the Council requires to carry out its duties . . . . The Council shall (A) evaluate Amtrak’s performance; and (B) make recommendations to Amtrak for achieving further cost containment and productivity improvements, and financial reforms . . . . In making its 

evaluations and recommendations . . . the Council shall consider all relevant performance factors, including . . . management efficiencies and revenue enhancements, including savings achieved through labor and contracting negotiations . . . . Amtrak shall report quarterly to the Council (A) the savings realized as a result of 

the [new labor work-rules] agreement and (B) how the savings are allocated.

Amtrak has made performing such tasks unduly difficult if not impossible for the 

Amtrak Reform Council. As such, I believe that the Council is unable to effectively 

fulfill the oversight role that Congress intended for it, and that there is no realistic 

prospect that it will be able to do so in the foreseeable future. Thus, I resigned my 

position effective July 10th of this year. 

I will summarize the facts regarding Amtrak obstructionism on several major 

issues—its so-called income tax refund, its freight program, and Amtrak productivity.

• Amtrak’s ‘‘Income Tax Refund’’: Congress in the Taxpayer Relief Act ordered the 

IRS to provide Amtrak with a $2.2 billion ‘‘tax refund’’—even though Amtrak 

has never paid federal income taxes. The ARAA, Section 209 states, ‘‘The Amtrak Reform Council shall report quarterly to the Congress on the use of 

amounts received by Amtrak under section 977 of the Taxpayer Relief Act of 

1997.’’ I was appointed by former Council Chair Christine Todd Whitman to assemble information for such reports. While Amtrak provided lists of capital 

projects, Amtrak routinely failed to provide rates-of-return for such projects deVerDate Apr 24 2002 09:19 Dec 10, 2003 Jkt 085968 PO 00000 Frm 00057 Fmt 6633 Sfmt 6621 S:\WPSHR\GPO\DOCS\85968.TXT SCOM1 PsN: CAROLT
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spite repeated requests. I was not surprised by GAO’s February report that 

stated Amtrak reports to the ARC are ‘‘less useful than they could be in helping 

the Council comply with its responsibility to monitor Amtrak’s use of Taxpayer 

Relief Act funds.’’

• Freight: To accommodate freight (which Amtrak refers to as ‘‘express’’) shipments, Amtrak has added time to its schedules, making trips longer for passengers. The ARC has asked Amtrak to provide the costs of its freight program, 

not just its revenues, and Amtrak Chairman Tommy Thompson assured me on 

September 24, 1998—2 years ago—that Amtrak would cooperate. Also since 

then Amtrak has asserted to the media that freight is ‘‘contributing to the bottom line.’’ This is a worthy goal, but unfortunately, freight profit-loss information has not been provided, so the truth of Amtrak’s claim cannot be verified. 

Amtrak has not been forthcoming on this issue in any respect. Absent evidence 

to the contrary, its highly probable taxpayers are subsidizing shippers who 

move freight on Amtrak, including major corporations like Campbell’s Soup and 

United Parcel Service. If true, that is an outcome never envisioned by people 

who worked to create a rail system for passengers.

• Productivity: Amtrak has misled the Senate by stating that it has improved 

workforce productivity. Up until my July departure, Amtrak had provided no 

factual support for assertions that the 20 percent increase in wages after new 

labor agreements were signed in 1997 will be offset by work-rules savings. 

Moreover, despite ARC reporting requirements, Amtrak failed to answer many 

questions about the subject. Based on information that can be gleaned from 

public reports, it appears that Amtrak’s productivity dropped in 1999 compared 

to prior years on 2 key measurements—passengers per employee and passengermiles per employee. In that last measurement, productivity was lower than 

every year of the previous ten years.

These examples regarding Amtrak’s stonewalling of the ARC are more fully explained in my complete testimony, including a chronology of when we asked Amtrak 

questions to which Amtrak was non-responsive. (Attachment 1.) 

No one really knows the full public cost of running Amtrak today. Senator Wayne 

Allard was justified to say recently in floor debate: ‘‘I have grown increasingly skeptical about what is going on with Amtrak. It seems they found a way to pick up 

government subsidies all over the place.’’ He is correct. Known federal subsidies to 

Amtrak will soon exceed $24.3 billion. But excluded from Amtrak reports are the 

costs of numerous public programs that help finance Amtrak or shift Amtrak expenses to the books of other agencies such as the Federal Railroad Administration, 

the Federal Transit Administration and the Treasury Department. The most notable 

of these is the federal bailout of more than $1 billion in Amtrak government-guaranteed loans, the cost of which is carried on the Treasury Departments books. (Attachment 2.) 

Amtrak’s pride in its new ridership record is not cause for celebration but cause 

for alarm. I say that because during this all-time record year of travel, Amtrak will 

be breaking a level set in 1988—twelve years ago. This means Amtrak’s ridership 

growth is anemic during the biggest travel boom in the history of our country. Indeed, its ridership figures are an indictment of Amtrak’s non-responsiveness to the 

changing travel marketplace. As food for thought, on Memorial Day weekend, U.S. 

commercial aviation carried well over 12 million passengers—which means in just 

one holiday weekend airlines carry more than half the number of people who board 

Amtrak during the entire year. Amtrak’s market share routinely drops, and today, 

according to the Eno Transportation Foundation, Amtrak holds only six-tenths of 

one percent of the travel market. (Attachment 3.) 

Amtrak is violating the law that requires it to run modern rail passenger service 

when it adds trains that are slower than trains were decades ago. On April 15, Amtrak began running the Lake Country Limited, which takes 3 hours and 20 minutes 

to travel from Janesville, Wisconsin, to Chicago. The old Chicago & North Western 

Railroad connected Janesville with Chicago an hour-and-a-half faster when Harry 

Truman was President in 1952. The press reports traffic on the train has averaged 

11 people per day in each direction. In Indiana, Amtrak added a train whose schedule is 3 hours slower than a pre-Amtrak train was on the same route when Calvin 

Coolidge was President in 1926. Meanwhile, I know this Committee has spent considerable time lately on airline performance, and I believe Amtrak on-time performance deserves the same attention. In this testimony I am revealing for the first time 

the completed results of my review of Amtrak scheduling practices. Amtrak may 

boast that it’s enjoying its ‘‘best on-time performance in 13 years,’’ but the facts 

show Amtrak performance outside of the Northeast is in shambles. Amtrak now inVerDate Apr 24 2002 09:19 Dec 10, 2003 Jkt 085968 PO 00000 Frm 00058 Fmt 6633 Sfmt 6621 S:\WPSHR\GPO\DOCS\85968.TXT SCOM1 PsN: CAROLT
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serts very long periods of time just before checkpoints where on-time performance 

is calculated. If Amtrak performance were measured at the stop before an official 

checkpoint, Amtrak’s on-time statistics would be far worse than official reports indicate. Amtrak employs this practice to a degree unprecedented in the railroad business. Amtrak’s method goes way beyond anything found in aviation today, so it’s possible that the airlines—even with terrible airport delays this summer—had a 

better on-time record than Amtrak did outside of the Northeast. (See Attachment 

4.) 

As one who has testified before Congress in support of the Acela Express program, 

I am pleased that the Acela Express will soon begin operations. The train is a needed improvement that I welcome because it will offer many amenities and quicker 

train travel. Im disappointed, however, with management of the project. The Acela 

Express is 3 years behind schedule. It is clear from Amtrak promises that the first 

Acela Express was to have been delivered in April 1996 and begin carrying passengers after a year of testing. My complete testimony quotes Amtrak’s words verbatim about the delivery schedule to begin in 1996. Moreover, I’m dissatisfied with 

the Acela Express schedules. For perspective, the New Haven Railroads Merchants 

Limited connected New York with Boston in 4 hours flat in 1950. They did that 

without the benefits of today’s electrification east of New Haven, tilt-train technology and advanced signaling systems. I also question the degree of liability facing 

the U.S. Government as a result of a $1 billion loan for the Acela Express from the 

Canadian government, the details of which remain secret. To my knowledge, the 

ARC was never informed of the loan, the uses to which it was put, principal amount 

owed, interest rate, repayment schedule, or other terms and conditions. I must 

ask—are the Acela Express trains serving as collateral? We don’t know. There is 

much we don’t know about this financial arrangement. (See Attachment 5.) 

Regarding the High Speed Rail Investment Act (S.1900/H.R.3700)—Amtrak has 

become zealous in torturing the English language to ‘‘re-define’’ what constitutes a ‘‘high-speed’’ train. This is most pronounced for proposed trains in the Southeast, 

Midwest and West where after money is spent the trains will still operate at rather 

ordinary speeds. Hence, the legislation will do virtually nothing to bring about highspeed trains. The bill simply turns over more responsibility to Amtrak, whose management and organizational culture are poorly suited to develop truly advanced 

train systems. Amtrak has taken seven years to design, build and test the Acela Express while other countries have completed such projects in only 4 years. One of the 

arguments for high-speed rail is that we can divert passengers from air travel to 

trains, thereby freeing up slots at congested airports. But the funds in this bill, once 

spent, will result in trains insufficient to the task of competing with air travel. The 

resulting passenger diversion rate from air would be so small that I doubt a single 

flight would be removed anywhere in our aviation system. Also, Amtrak may spend 

a portion of the funds on routes that are excessively long, such as Washington, D.C. 

to Jacksonville, Florida, where there is no way—not now, not ever—that even the 

fastest high-speed trains could compete with air travel. No executive I’ve ever met 

on a single high-speed rail operation overseas has ever proposed a route that long, 

at 753 miles, when high-speed rails effectiveness falls after a distance of 300 miles. 

For these reasons, Amtrak’s claim that this bill will help ease aviation congestion 

is unscrupulous. Moreover, my understanding is the cost of the legislation will be 

more than what Amtrak claims. I note that the Heritage Foundation issued a report 

on August 28 describing the federal government’s implicit interest payments, concluding that ‘‘The loss of tax revenues to the U.S. Treasury would total $16 billion 

if interest rates remain unchanged at 8 percent.’’ With Amtrak’s financial record, 

it’s doubtful that Amtrak will ever repay those bonds. I view the bill as a way to 

create another method to bury subsidies to Amtrak in the ledgers within the Treasury Department, similar to what was done in the 1980s when Amtrak defaulted on 

more than $1 billion in government-guaranteed loans. Finally, by reinforcing Amtrak’s de facto monopoly, the bill is harmful to those imaginative folks in the private-sector who have expressed interest in developing high-speed rail in the United 

States. To effectively plan market-sensitive high-speed train systems, a new direction is needed to include participation by regional agencies, private businesses and 

joint ventures in innovative, imaginative public-private partnerships. Finally, I ask 

you to consider that the Amtrak Reform Council, the GAO, and the DOT Inspector 

General have all faulted Amtrak for not having the proper capital planning in place. 

It is unreasonable to fund Amtrak-style high-speed rail when we don’t even know 

what Amtrak’s project costs will be. (See Attachment 6.) 

In conclusion, Amtrak will likely require billions of additional tax dollars to stay 

alive. Congress should take a closer look at Amtrak and demand real accountability. 

Congress should consider investigating inappropriate Amtrak actions and establish 

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gress should amend the ARAA to tighten reporting requirements on Amtrak financial issues. In the interests of passengers, Congress should pass a ‘‘Truth in Scheduling’’ provision to require Amtrak trains to be on time more often in more cities 

it serves, not just at the cities that serve as ‘‘checkpoints’’ for the purposes of calculating on-time performance. Finally, Congress should refuse to pass the so-called 

High Speed Rail Investment Act because it will not bring about high-speed trains. 

The bill will help bail out Amtrak during another financial crisis, a reasonable conclusion considering that Amtrak is awash in red ink now and remains a candidate 

for liquidation. (Attachment 7.) 

Mr. Chairman, that concludes my testimony. I will be happy to answer your questions. Thank you. 

Attachment 1: Amtrak’s Lack of Cooperation with the ARC 

I believe that the Amtrak Reform Council is unable to effectively fulfill the oversight role that Congress intended for it, and that there is no realistic prospect that 

it will be able to do so in the foreseeable future. I say this because Amtrak has resisted providing information in significant areas—impairing the Council as it attempted to carry out its statutory duties. 

The Council’s right to information is unconditional as to nature and time frame, 

subject only to the requirement that trade secrets, etc. be kept confidential. Understanding the sensitivity of delving into Amtrak’s affairs, the Council established procedures to ensure against the public disclosure of information that is a trade secret 

or commercial or financial information that is privileged or confidential. Council 

members voluntarily signed ARC-developed confidentiality agreements. Amtrak declined to accept those confidentiality agreements and demanded that members sign 

an Amtrak-written confidentiality agreement. All Council members signed the second agreement. Despite the Council’s good-faith demonstration that proper safeguards were in place, Amtrak nevertheless declined to provide germane or timely 

information. 

Amtrak’s IRS ‘‘Income Tax Refund’’ Expenditures Were Unexplained 

The Council has a statutory responsibility to monitor Amtrak expenditures from its tax return of $2.2 billion authorized by Section 977 of the Taxpayer Relief Act 

of 1997 (TRA). The legislative intention of Section 977 was to make significant 

amounts of funding available so that Amtrak could make investments in high-priority, high-return capital projects that would facilitate Amtrak’s ability to operate 

without federal operating subsidies. 

Amtrak first resisted providing information to the Council after the ARC’s first 

chair, New Jersey Governor Christine Todd Whitman, directed the start of an evaluation as to how Amtrak was spending the unique and unprecedented subsidy. 

The question was whether Amtrak was using TRA funds for the kinds of highpriority, high-return investments that will help its bottom line. The ARC asked Amtrak what the projected rates of return are per project financed. This is a common 

practice on freight railroads, where officials rank which capital improvements—

track and signal work, new yards or closing of old ones, bridge replacement, curve 

straightening, congestion elimination, and so forth should receive funding from the 

current year’s budget allocation based on rate of return. In general, it could be assumed that Amtrak’s financing of high rates-of-return projects would be a healthy 

practice, but investment in low rates-of-return projects would indicate a poor practice. 

Obtaining such useful information from Amtrak about its TRA disbursements was 

an odyssey that failed. The following chronology represents my personal interactions 

on this issue: 

May 26, 1998: The Amtrak Reform Council holds its first meeting. 

July 6, 1998: At an ARC meeting, Amtrak indicated that the first TRA quarterly 

report was being prepared for submission to the Council. The ARC Chairman appointed me and one other member to review the upcoming Amtrak report and prepare a draft ARC report to Congress for consideration by the full Council. 

July 31, 1998: Amtrak submitted ‘‘Making Investments in America’s Passenger 

Rail System: Amtrak’s Quarterly Report on TRA Funding.’’ The report is replete 

with phraseology stating that Amtrak is making a ‘‘wise investment’’ of its resources 

and that funds are being committed for ‘‘high rate-of-return’’ projects that were selected after ‘‘rigorous evaluation.’’

Date Uncertain: Shortly thereafter I asked Amtrak to substantiate its assertions 

by providing rates-of-return for TRA-funded capital projects. Amtrak asserted that 

it doesn’t compile such data. Which statement is the ARC to believe? This statement 

or the one on July 31? I again requested Amtrak to provide TRA rates-of-return. 

57

August 31, 1998: Recognizing that rates-of-return would not be forthcoming, I decided to look at the ‘‘bigger picture’’ by requesting a route-by-route summary of the 

extent to which operating losses are expected to drop because of TRA-financed 

projects. My question was: On which routes will TRA funding induce reduced costs 

and increased revenue? Amtrak’s reply was non-responsive. 

September 17, 1998: At an ARC meeting, I reported that Amtrak failed to provide 

appropriate responses to requests for information and said I believed that ARC was 

in no position to issue a report to Congress that could be responsive to the statute. 

The ARC had no staff during this period, and it was difficult for the Councils citizen-volunteers to proceed. I said that I would continue, time permitting, to try to 

obtain data for a later report to Congress. 

September 24, 1998: In a meeting between the ARC and several members of the 

Amtrak Reform Board, I indicated to Amtrak Chairman Tommy Thompson, Vice 

Chairman Michael Dukakis and CEO George Warrington that Amtrak’s responses 

thus far have been inadequate. I also introduced the subject of concern over possible 

financial losses in Amtrak’s new freight program and asked Amtrak to provide the 

Council with a profit-loss statement. Governor Thompson promised that proper answers will be provided, a promise that was never kept. 

October 1, 1998: In a telephone call, several Amtrak representatives agree to provide data on these topics in a follow-up letter. 

October 21, 1998: A representative of the Federal Railroad Administration provides added perspective regarding the TRA issue, but admits that he also is unable 

to quantify rates-of-return on TRA-financed capital items. 

Late 1998: I concluded that Amtrak either does not have or will not provide key 

pieces of measurement regarding TRA expenditures. Missing was the degree to 

which performance of each route is enhanced by TRA expenditures, an important 

consideration because, for Amtrak to reach operational self-sufficiency, routes in addition to Boston-Washington must become profitable to offset routes that will continue to lose millions of dollars annually. I’ve asked Amtrak to identify any route 

that TRA expenditures will help move into the black and illustrate with a timeline 

when each such route will reach the break-even point. Amtrak failed to respond. 

Because of Amtrak’s non-responsiveness, I lay squarely at Amtrak’s doorstep the 

resulting inability of the Council to meet its statutory obligation to file reports to 

Congress on TRA funding. The limited documentation Amtrak did provide fails to 

demonstrate the economic benefits of its capital projects or how they will help Amtrak reach self-sufficiency. 

Continuing a search for adequate information, by early 1999 I voluntarily reviewed (or re-reviewed) numerous Amtrak documents, namely:

• Strategic Business Plan, FY1998–FY2000, dated September 23, 1997

• FY 1998 Capital Budget, November 5, 1997

• FY 1998 Proposed Addendum to the Capital Budget, February 3, 1998

• FY 1999 Amtrak Legislative Report and Federal Grant Request, February 13, 

1998

• Capital Plan Summary Presented to ARC, April 24, 1998

• Amtrak’s presentation to ARC, May 26, 1998

• FY 1998 Third Quarter Business and Financial Performance Report, July 31, 

1998

• FY98 Capital Projects Funded by Federal Funds, submitted to ARC on Sept. 16, 

1998

• Capital Investment Summary submitted to ARC on October 7, 1998

• Strategic Business Plan, FY1999–2002, submitted to ARC on October 19, 1998

In doing so I discovered a few hints of capital-related data. For example, routespecific ‘‘internal rates of return’’ can rank from a high of 121 percent (for rerouting 

Florida trains) to a low of 5 percent for acquiring a parking facility (which adjoins 

the Providence station). But such limited information was gleaned from my voluntary effort, not because Amtrak was forthcoming. Moreover, if Amtrak doesn’t calculate rates-of-return, as it asserted to the ARC, how could some of these reports 

contain estimated rates-of-return? 

Indicators are absent in the above-listed reports regarding which investments will 

help convert money-losing routes into profitable ones or at least vastly improve their 

financial performance. This is a significant concern. In Fiscal Year 1997, Amtrak 

operated 18 routes that endured fully allocated losses exceeding $20 million per 

58

route. Moreover, if upcoming labor negotiations cause costs to increase, a logical 

question is the wisdom of spending capital on low rate-of-return projects where cost 

increases outstrip the savings attributable to the capital projects. 

Amtrak’s roadblocks and issuance of conflicting information was telling. I concluded that Amtrak lacks diligence in funding high rate-of-return projects and high 

market-growth opportunities and wants to avoid scrutiny on the method by which 

it does select projects. It seemed to me that Amtrak doesn’t want its current practices to be well known or understood. 

Skepticism abounds regarding Amtrak’s financial decision-making. Consider the 

independent assessment of Amtrak conducted in 1997 by the Working Group on 

Inter-City Rail. It found among other deficiencies that Amtrak’s subsidies ‘‘are not 

directed to activities of maximum benefit.’’ That statement could easily be applied 

to how Amtrak commits TRA funding and possibly explains why Amtrak 

stonewalled ARC requests for information. 

When the ARC was finally able to hire a small staff to review Amtrak’s capital 

spending, the staff concluded, and the Council approved for publication in its January 24, 2000, report ‘‘A Preliminary Assessment of Amtrak’’ this statement:

Based on preliminary information, significant amounts of the TRA funds are being 

borrowed temporarily for maintenance expenditures rather than being immediately invested by Amtrak in high priority, high return capital projects necessary 

to achieve the improvements in financial performance initially anticipated when 

Section 977 of the TRA was enacted. If these temporary loans are not repaid, such 

expenditures for maintenance (which are permitted under the TRA) will likely result in the need for increased capital investment funding by the federal government and others in the future. In addition, Amtrak has not produced a long-term 

capital expenditure plan for several years. The Council, the Congress, and other 

governmental agencies need Amtrak’s long-term capital expenditure plan to carry 

out their statutory obligations.

On February 29, 2000, the GAO in its report ‘‘Amtrak Needs to Improve Its Accountability for Taxpayer Relief Act Funds’’ examined TRA funding with different 

objectives and reported:

Amtrak’s quarterly reports to the Amtrak Reform Council on its use of Taxpayer 

Relief Act funds do not fully disclose the extent to which Amtrak has used these 

funds for equipment maintenance. As a result, these reports are less useful than 

they could be in helping the Council comply with its responsibility to monitor Amtrak’s use of Taxpayer Relief Act funds. . . the reports do not fully disclose how 

TRA funds are actually used once they are deposited into Amtrak’s general cash 

account . . . . Amtrak reviews and approves capital improvement projects to determine that the projects qualify under TRA. However, it does not determine 

whether individual expenses incurred and paid are allowable under the act. We 

find Amtrak’s lack of review of expenditures troubling because, without such a review, Amtrak does not have reasonable assurance that TRA funds are spent in 

accordance with the law.

Incidentally, when I was in Amtrak’s Public Affairs Department in the 1970s and 

served on the Passenger Service Committee, we reviewed capital projects based on 

estimated rates-of-return and recommended projects to the Board for approval. It is 

beyond belief that Amtrak’s large bureaucracy in the 1990s, one that relies extensively on computer accounting systems, is unable to produce data that Amtrak’s 

smaller staff without computers compiled in the 1970s. 

Amtrak estimates that it will need in excess of $4 billion in federally provided 

capital over the next 5years. Amtrak identifies the $2 billion in TRA funding as a 

‘‘first step’’ toward obtaining $4 billion through the appropriations process. But Amtrak does not deserve an additional $4 billion in subsidies when Amtrak has failed 

to justify how it is spending the $2.2 billion ‘‘income tax-refund’’ it has already received. 

For Two Years Amtrak Has Failed to Provide Costs of its Freight Service 

Since starting freight operations Amtrak has claimed ‘‘success’’—but always citing 

only the program’s revenues, not startup costs or operating costs. Freight income/

expense is a major issue because Amtrak claims freight can help make it profitable. 

The ARC has urged a transparent accounting of the revenues and expenses so that 

the claim can be substantiated, a request Amtrak has ignored. Amtrak asserts to 

the ARC it cannot as yet separate freight expenses from mail expenses and create 

a freight profit-loss statement. (Who remains in a line of business for more than 2 

years without knowing its financial performance?) Yet Amtrak claims to the news 

59

media that freight is making a ‘‘positive contribution’’ to the bottom line. How can 

this information exist for media purposes but not the Amtrak Reform Council? 

If the ARC is to meet its mandate to evaluate Amtrak’s performance and make 

recommendations to Amtrak for achieving further cost containment, productivity improvements, and financial reforms, then the ARC must understand the extent of 

profit or loss incurred in this service. In a meeting on September 24, 1998, I asked 

Amtrak Chairman Tommy Thompson to insure Amtrak provides the ARC with information to help determine the effect of carrying freight on Amtrak’s bottom line. 

Gov. Thompson promised that Amtrak would cooperate, yet these questions were 

not answered—at least not prior to my resignation in July, 2000. 

A recent report indicates that Washington State apple growers are considering 

shipping via Amtrak. If Amtrak’s program is making a ‘‘positive contribution,’’ why 

it is necessary to ask legislators in Olympia to spend $500,000 in state funds and 

seek up to $10 million in federal funds to buy refrigerated cars to ship apples on 

Amtrak? This is evidence suggesting that Amtrak’s freight program is unprofitable 

and is subsidized by federal and state taxpayers. 

Amtrak’s new Kentucky Cardinal exists primarily to carry United Parcel Service 

(UPS) package freight from Louisville to Chicago. It is possible that this train is losing money, which would mean that public funds intended for passenger travel are 

subsidizing UPS. When rail advocates worked to create Amtrak, none of us intended 

to create subsidies for private shippers. 

Questions About Productivity Were Unanswered 

It appears that Amtrak has misled Congress about improvements in workforce 

productivity. According to press accounts, Amtrak said in a hearing on November 

7, 1997, that pay raises negotiated that year would be paid for by more efficient 

operations. But no data has been submitted to the ARC to substantiate Amtrak’s 

claim. In fact, in 1999 Amtrak productivity worsened on 2 measures that were available to the Council—Riders Per Employee, which at 854.2 was lower than in six of 

the previous ten years, and Passenger Miles Per Employee, which at 211,681 was 

lower than every year of the previous ten years. 

It should not be assumed that productivity refers only to employees represented 

by labor unions. Anecdotal evidence suggests that Amtrak’s management is 

overstaffed and contributes to Amtrak’s lack of efficiency gains. Such observations 

gained credibility when the GAO reported in a May 2000 report:

Amtrak attempted to reduce its management staff in 1994 and 1995 by offering 

management employees early retirement and buyouts to leave the company. As 

a result of these buyouts and early retirements, Amtrak’s management staff declined by a total of about 15 percent between 1994 and 1995. But, by 1999, the 

number of management employees was almost the same as it was in 1994.

The Council is charged with evaluating Amtrak’s efficiency and its progress in 

achieving productivity improvements. Section 203(g)(2)(C) of the ARAA provides 

that in making its evaluation and recommendations, ‘‘the Council shall consider all 

relevant performance factors, including . . . management efficiencies and revenue 

enhancements, including savings achieved through labor and contracting negotiations.’’

The Council must monitor Amtrak work-rule savings and include an assessment 

of such savings in its annual report to Congress. Note how specific the requirement 

is under Section 203(g)(3): ‘‘If after January 1, 1997, Amtrak enters into an agreement involving work-rules intended to achieve savings with an organization representing Amtrak employees, then Amtrak shall report quarterly to the Council—

(A) the savings realized as a result of the agreement; and (B) how the savings are 

allocated.’’

Note also the specificity of Section 203(h): ‘‘Each year . . . the Council shall submit to the Congress a report that includes as assessment of (1) Amtrak’s progress 

on the resolution of productivity issues; or (2) the status of those productivity issues, 

and makes recommendations for improvements and for any changes in law it believes to be necessary or appropriate.’’

The Council’s duties are clear, yet Amtrak failed to provide needed and relevant 

information to ARC’S questions. According to the Council’s January report to Congress: 

Amtrak’s responses to the Council’s request to date essentially consist of copies 

of:

• recently negotiated labor agreements;

• management summaries of various work-rule changes in the agreements;

60

• recent examples of productivity analyses regarding: (i) the Amtrak Reservations 

Centers (1995), (ii) benchmarking Amtrak maintenance-of-way productivity 

against the rail transit industries (1998), and (iii) determining Amtrak’s maintenance cost for diesel locomotives (1997) (for which the outside contractor needed to restate Amtrak’s financial accounting system reports with its own estimates); and

• statements regarding certain identified savings from various work-rule changes 

in recent agreements; and various factual data regarding the Amtrak labor 

force.

Amtrak also submitted to the Council a ‘‘FY 1999 Report on Productivity Improvements and Work Rule and Cash Savings,’’ which provided a set of numbers on a 

quarter-by-quarter basis for FY1999 . . . . The report stated a total of $19.5 million 

in ‘‘productivity improvements and work rules and cash savings’’ for FY1999 [but 

the data] arguably may not satisfy the statutory criteria of ARAA Section 203(g)(3). 

The current format of Amtrak’s report does not clearly show how the savings are 

allocated and provides no analysis of how the numbers were calculated. 

That was a non-confrontational way of saying that Amtrak failed to document its 

claim that 20 percent of recent wage increases will be offset by work-rules savings; 

failed to substantiate that it has a methodology in place to measure productivity; 

failed to provide any productivity analyses that Amtrak or a consultant for Amtrak 

has conducted; and failed to clarify whether Amtrak has performed any studies regarding cost savings in the area of contracting out. 

On a positive note, as reported in the ARC’s January report, Amtrak has achieved 

some work-rules changes in recent agreements that have the potential to bring cost 

savings. Such changes include contracting out of Amtrak’s entire Commissary operations, extension from 4 hours to six hours of the period before a second engineer 

must be added to a locomotive, flexibility in establishing district gangs in the Bridge 

& Building and Electric Traction sub-departments, and increased management flexibility to establish Construction Gangs working outside normal starting times on the 

Northeast Corridor. 

The ARC has been stymied in its attempt to review the facts regarding these 

issues. I note with interest this passage from the GAO’s May 2000 report: ‘‘Amtrak 

does not have measures of labor productivity for its lines of business (e.g., intercity 

passenger service, commuter service) that would allow it to better manage its labor 

costs.’’

Attachment 2: Full Public Cost of Amtrak Is Unknown 

Federal Amtrak Subsidies Soon to Exceed $24.3 Billion 

No one really knows the full public cost of running Amtrak. Amtrak’s financial 

reporting system does not fairly represent to government officials or taxpayers its 

condition or level of subsidies. Meanwhile, Amtrak’s financial losses continue. For 

the first three quarters of fiscal year 2000, its operating loss grew to $710.9 million 

from the prior year’s figure of $705.1 million. Although not Amtrak’s worst performance, it is nonetheless an increase over the prior year and a far cry from Amtrak’s glowing picture of its finances. 

Consider the methods employed that artificially reduce Amtrak’s self-reported 

subsidy totals and mask the extent of its financial condition:

• Amtrak benefits from a taxpayer-sponsored windfall. Although Amtrak has 

never paid a penny in income taxes, Congress ordered the IRS to give Amtrak 

a $2.2 billion ‘‘tax refund.’’ Amtrak has been using the funds in part to repay 

a portion of what I’ve been told was $1.6 billion in debt to the private capital 

markets, and in part as an investment in high-yield, interest-bearing accounts. 

Thus, the ‘‘income tax refund’’—money Amtrak did not ‘‘earn’’ in the true busi- ness sense—is reducing Amtrak debt costs and increasing interest income, a 

balance-sheet sweetener of monumental proportions that has nothing to do with 

its commercial activity as a passenger railroad.

• Amtrak now inflates income by counting many public subsidies as ‘‘revenue’’ in 

its annual report, something it hasn’t done through most of its history. For example, the GAO testified before a House Committee on October 28, 1999, that 

Amtrak records a portion of its unearned ‘‘income-tax refund’’ made available 

by the Taxpayer Relief Act as revenues.

• Amtrak has created the appearance of lower operating losses by shifting almost 

a half a billion dollars in maintenance costs to its capital account, according to 

the GAO.

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The GAO report issued in May 2000 entitled ‘‘Amtrak Will Continue to Have Difficulty Controlling Its Costs and Meeting Capital Needs’’ stated that ‘‘Amtrak’s 

losses have remained high: In 1999, its net loss—revenues minus expenses—was 

about $900 million.’’ The DOT Inspector General has estimated that Amtrak will 

incur more in cash losses than Amtrak suggests. The DOT Inspector General and 

the GAO have found that Amtrak is unlikely to meet a legal requirement of zero 

operating subsidies by the end of fiscal year 2002. 

Dispute About How to Monitor Amtrak’s Performance 

Section 203(g)(2)(B) of the ARAA prescribes that the Amtrak Reform Council shall 

consider all relevant factors in evaluating Amtrak’s performance, including ‘‘appropriate methods for adoption of uniform cost and accounting procedures throughout 

the Amtrak system based on generally accepted accounting principles.’’ [Emphasis 

added.] According to the Legal Counsel to the ARC, the statute provides for no other 

standard than generally accepted accounting principles. The GAAP principles comprise the criteria normally used to measure the financial performance of for-profit 

corporations, which Amtrak—under the law—was established to be. 

Amtrak, however, wants to exclude depreciation and certain other costs as operating expenses for purposes of measuring operating self-sufficiency. Amtrak wants 

to treat progressive equipment overhauls as a capital instead of an operating expenditure. If Amtrak’s contentions are accepted, there would be no standard in place 

to ensure that Amtrak becomes operationally self-sufficient by Fiscal year 2003 and 

that taxpayers no longer subsidize Amtrak operations after that date. 

This issue has concerned several oversight bodies:

• The ARC stated in its January report that ‘‘The accounting standard specifically 

referred to in the Council’s statutory mandate, GAAP, is, both logically and 

under current law, the method by which Amtrak’s performance is measured.’’

An opinion by the ARC’s Legal Counsel concluded that ‘‘Both GAO and DOT/

IG have publicly noted their view that under the ARAA, Amtrak operating expenses as defined under GAAP, such as progressive overhauls, cannot be federally funded after Fiscal year 2002 regardless of how such operating expenses 

were funded in the past.’’

• The DOT Inspector General stated before a House Committee on March 4, 1999: 

‘‘Regardless of the type of federal grants Amtrak receives or how Amtrak is permitted to spend them, Amtrak will have to cover all of its operating expenses 

(except for excess payments for RRTA) in Fiscal year 2003 from non-federal 

sources. In other words, maintenance of equipment and maintenance of way expenses would, under current law, no longer be eligible for federal funding in 

2003. That is the mandate from ARAA, and it is the standard we are using to 

gauge Amtrak’s financial viability in our assessments.’’

• The GAO report to this Committee in July 1999 entitled ‘‘Amtrak’s Progress in 

Improving Its Financial Condition Has Been Mixed’’ said Amtrak ‘‘disagreed 

with our inclusion of expenses for progressive overhauls in our discussion of 

Amtrak’s progress in achieving operational self-sufficiency . . . . As discussed 

in our report, generally accepted accounting principles consider progressive 

overhaul expenses to be operating expenses [and] we conducted our review from 

January 1999 through June 1999 in accordance with generally accepted government auditing standards.’’

My view is that if Amtrak’s financial performance were truly positive, Amtrak 

would have no need to redefine operating expenses as a device to lower its perceived 

losses; would have no need to request treatment that is prohibited in corporations 

throughout America; and would have no need to further impair the public’s understanding of Amtrak’s true costs and subsidies. 

Backdoor Subsidies Increasing 

In July, Senator Wayne Allard said in a floor debate: ‘‘I have grown increasingly 

skeptical about what is going on with Amtrak. It seems they found a way to pick 

up government subsidies all over the place.’’ His doubts are justified as Washington 

has been masterful in masking the depth of Amtrak subsidies. 

I’m unable to recall when an independent oversight body or public agency last 

tabulated and presented for public scrutiny the full public cost of running Amtrak, 

but it may have been a GAO report in the early 1980s or late 1970s. That report 

was prior to the start of numerous programs that finance Amtrak or artificially 

lower Amtrak’s costs by shifting expenses to the books of other agencies such as the 

Federal Railroad Administration (FRA), the Federal Transit Administration (FTA) 

or the Treasury Department. 

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Excluded from Amtrak’s annual reports, and congressional testimony is a sum of 

the costs of numerous publicly funded programs that assist in financing Amtrak, as 

follows: 

Federal Funding Not Included in Amtrak Subsidy Totals 

• FRA Grants—Amtrak benefits from grants for train stations, historic building 

restorations, grade crossing improvements, studies and technology development.

• FTA Grants—2 examples are a grant of $18.7 million to Pennsylvania to purchase coaches for Amtrak and $3.5 million to Vermont to start a train to Rutland. FTA grants also help pay to build or improve Amtrak stations.

• TIFIA Federal Credit Assistance (a new program): Amtrak is seeking a $29 million direct loan in 2001 to finance a $120 million plan to rehabilitate existing 

locomotives for its Acela Regional service in the Northeast Corridor. This is 

under the 2-year-old Transportation Infrastructure Financing and Innovation 

Act program administered by the DOT.

• Other federal funds—some states like California rely on Congestion Mitigation 

& Air Quality funds to support Amtrak.

• Federal job-training funds have benefitted Amtrak in several locations, such as 

a $500,000 grant to Amtrak to retain a reservations office in Philadelphia.

• Unknown Risk Loan—In 1996, an agency of the Canadian government issued 

a loan to help finance the Acela Express, the principal of which remains outstanding. Without knowledge of the details of this loan, the degree to which 

American taxpayers hold liabilities to repay the loan’s principal, interest or penalties in a default is unknown.

• For many years Amtrak failed to list funds received through guaranteed loans. 

Amtrak never repaid $880 million in loans received between 1971 and 1975, 

and that obligation, plus more than a quarter of a billion dollars in interest, 

was paid by the FRA on Amtrak’s behalf. For evidence of this continuing taxpayer obligation, the 1983 Amtrak annual report contains this disclosure: ‘‘On 

September 30, 1983, Amtrak had borrowed under notes payable to the Federal 

Financing Bank up to its maximum federal guaranteed loan authority of 

$880,000,000. On October 5, 1983, this obligation, plus $239,635,000 in accrued 

interest, was paid on Amtrak’s behalf by the Federal Railroad Administration, 

and a new note in the amount of $1,119,635,000 was executed as of that date 

between Amtrak and the U.S. Government. The note matures on November 1, 

2082, and will be renewed for successive 99-year terms. Interest is payable only 

in the event of prepayment or acceleration of the principal.’’

It is generally understood that since 1970 Congress has appropriated more than 

$23.2 billion to Amtrak. But if the $1.1 billion note to cover Amtrak’s loan default 

is added (which is rarely done because it wasn’t an ‘‘appropriation’’), the federal government’s expenditures total at least $24.3 billion. (State operating and capital subsidies total at least $2 billion for a total of at least $26 billion in public funding.) 

But the true cost of subsidizing Amtrak if we include all programs is unknown.

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Attachment 3: Amtrak’s Growth Is Anemic Despite a Travel Boom 

As one who has promoted train travel for many years, Im pleased that more people are riding trains today. However, Amtrak is greatly exaggerating its success in 

building ridership. The Amtrak Reform Council’s January report stated: ‘‘During a 

decade when the American economy and most of its transportation system have expanded in an unprecedented manner, Amtrak’s ridership has remained virtually unchanged.’’

Amtrak Traffic Level Is a Sad Tale 

Amtrak’s new ridership record is hollow because during this all-time record year 

of travel Amtrak will only be breaking a level set in 1988—twelve years ago. In 

1999, which Amtrak also boasts of being ‘‘highly successful,’’ Amtrak carried 21.5 

million passengers, a million passengers lower than it projected in a report to Congress, only 400,000 above the previous year, and the same number it carried in 

1988. Also in 1999, Amtrak usage totaled 5.3 billion passenger-miles, 500 million 

passenger-miles lower than it projected in a report to Congress and a number equal 

to or lower than that in 8 of the last 10 years. 


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In testimony before a House Committee on October 28, 1999, the GAO observed 

that ‘‘in fiscal year 1997, fewer than 100 passengers, on average, boarded Amtrak 

intercity trains and connecting buses per day in 13 states.’’ Although Amtrak will 

set a record in fiscal year 2000, it is still true that usage remains very light at many 

points on Amtrak’s route system. 

Amtrak Ridership Growth Is Vastly Inferior to That of Aviation 

On Memorial Day weekend, U.S. commercial aviation carried well over 12 million 

passengers—which means in just one holiday weekend airlines carry more than half 

the number of people who board Amtrak during the entire year. The gap continues 

to worsen for Amtrak despite serious airline and FAA problems. In Amtrak’s first 

full year of operation, 1972, Amtrak carried an average of 45,500 passengers a day. 

In 1999, more than a quarter-century later, it stood at only 58,900 daily. Meanwhile, the number of U.S. airline passengers has more than tripled, from 524,100 

daily in 1972 to 1,740,800 daily in 1999. (If airline traffic reaches a projected 670 

million this year, the daily air travel count will total 1,835,600.) 

Population Rises But Amtrak’s Usefulness Falls 

The U.S. population in 1972, Amtrak’s first full year of operation, was 209.9 million. The Census Bureau population estimate as of September 18, 2000, is 275.8 million—up 65.9 million. The vast majority of these additional 65.9 million people 

aren’t riding Amtrak. Amtrak’s insensitivity to marketplace messages is why Amtrak’s share of the intercity travel market is lower than ever—six-tenths of one percent and still falling. 

Projections Doubtful 

Amtrak representations to this Committee about future ridership should be evaluated in the light of history. In 1998 Amtrak told Congress its fiscal year 1999 ridership would reach 22.5 million—but it turned out that its traffic was a million passengers lower. This is a long-running problem. A GAO study in 1979 looked at earlier Amtrak reports to examine ridership estimates. GAO found that in 1974 Amtrak filed with Congress a projection that ridership in 1979 would be a stunning 

37 million (it turned out to be 18.7 million passengers). In 1975 Amtrak downgraded 

the estimate to 29.2 million passengers (it turned out to be 17.4 million passengers). 

Amtrak’s estimates about future ridership deserve great skepticism. 

When ridership estimates are off, so are revenue estimates, and this inaccuracy 

is a continuing problem. In 1995 testimony to Congress, the GAO stated that Amtrak’s financial problems have accelerated, and one reason is that ‘‘Amtrak overestimated passenger revenues by $600 million from 1991 through 1994.’’

On this very day we are hearing from the DOT Inspector General who has found 

in his latest assessment that under certain circumstances Amtrak’s cash loss would 

be about $1.4 billion more than it projects over the 5-year period, 2000 through 

2004.

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Attachment 4: Amtrak Expands Network of Poor, Slow Trains 

New Amtrak Trains Are Slower than 1926, 1952 pre-Amtrak Trains 

Prospects for success on new and proposed Amtrak routes in most of the nation 

are bleak. For example, Amtrak’s new Kentucky Cardinal is inferior to the equivalent service provided by the Pennsylvania Railroad 70 years ago. Amtrak’s 12-hour 

Chicago-Jeffersonville, Ind., (near Louisville) schedule is 3 hours longer than it took 

our great-grandparents to ride a 1926 ‘‘milk run’’ on the same route, which was 

pulled by a steam locomotive and served nearly every village along the way. This 

is why I have called this Amtrak train—one of the slowest in the world—a ‘‘Conestoga Wagon With Lights.’’ This train is driven by Amtrak’s desire to carry UPS 

parcel freight, and the passenger accommodations are but a fig leaf to provide Amtrak with legal cover behind which it expands freight operations. 

On April 15, Amtrak began running the Lake Country Limited, which takes 3 

hours and 20 minutes to travel from Janesville, Wisconsin, to Chicago. The Chicago 

& North Western train in 1952 connecting Janesville with Chicago was an hourand-a-half faster. The media reports traffic on the train has averaged 11 people per 

day in each direction. Amtrak plans to add a train from Fond du Lac, Wisconsin, 

to Chicago on a 3 hour, 39 minute schedule. Its 1952 predecessor was an hour faster. 


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New Slow Trains Violate Amtrak Law 

Amtrak’s assertion that millions of new travelers will climb aboard such slow 

trains is bogus. I believe that the Kentucky Cardinal, Lake Country Limited and the 

proposed Fond du Lac services are illegal because they violate Amtrak’s statutory 

mandate to provide modern rail passenger service, 49 USC Sec. 24101 (a)(1)(b). 

What is ‘‘modern’’ about trains that are slower than trains on the same routes were 

in the 1950s, 1940s, and earlier? 

Amtrak Priority Should Be to Fix System of Late-Running Trains 

While Amtrak employs resources to start new trains, its existing services outside 

of the Northeast Corridor have terrible on-time performance records. As a member 

of the Council facing significant policy issues, I was little inclined to pursue Amtrak’s poor operating practices. 

My inclination changed, however, when Amtrak Chairman Tommy Thompson sent 

a letter to the Council in 1999 asserting that on-time performance was 80 percent 

and ‘‘still ahead’’ of airline performance. The claim was false as many long-distance 

trains in the Midwest and West were routinely running 2 or more hours behind 

schedule. 

Next came a press statement that Amtrak has ‘‘the best on-time performance in 

13 years.’’ I knew the statement was untrue because of information coming in from 

around the nation about late-running Amtrak trains. As a former consumer-group 

leader, I was motivated to conduct my own review of Amtrak scheduling practices. 

I determined that Amtrak reports its trains as being far more punctual than they 

really are on virtually every route outside of the Northeast Corridor. Amtrak abuses 

what used to be a modest railroad practice to put extra minutes (‘‘fat’’) into its timetables for ‘‘scheduling cushion.’’ Amtrak inserts very long periods of time just before 

‘‘checkpoints’’ where on-time performance is calculated. If Amtrak on-time performance were measured at the stop before an official checkpoint, Amtrak’s record would 

be much worse than official reports indicate. In fact, the performance figures would 

be devastating. Amtrak employs this dishonest practice on a sweeping basis. 

It is highly likely that the airline industry—despite very serious delays—had an 

on-time performance record this summer that was superior to that of Amtrak outside of the Northeast. One reason is that the time added near the end of a flight 

schedule is nowhere near the time inserted by Amtrak. Also, an aircraft doesn’t 

serve 20 communities a day, arrive an hour or more late at 19 of them as Amtrak 

does, and be considered punctual because it eased through ‘‘fat’’ in the end of the 

schedule and was on-time only at the checkpoint. (Amtrak generally defines on-time 

for short-distance trains as arriving within 10 minutes of schedule and for long-distance trains as arriving within 30 minutes of schedule.) 

In an August 31, 1999, ARC meeting, I provided a preliminary analysis of Amtrak’s misleading performance figures to the Council with Amtrak representatives 

in attendance. I had 3 purposes in introducing the subject—to alert the ARC of the 

extent to which Amtrak presents misleading figures to the Council; to possibly discuss the revenue loss that Amtrak suffers as a result of misleading travelers; and 

to question whether Amtrak has undue overtime expenses if employees work hours 

conform to scheduled train times instead of their actual late arrivals. It turns out 

that concerns about such expenses are justified considering these findings in GAO’s 

May 2000 report:

Amtrak incurs a fairly high amount of overtime to provide its services, which may 

suggest some level of inefficiency in its utilization of its labor force. From 1995 to 

1999, overtime represented, on average, about 11 percent of Amtrak’s total employee 

hours worked. The amount of overtime hours also increased steadily during this period—from about 4.2 million hours in 1995 to about 6.3 million hours in 1999 . . . . 

Amtrak did not know specifically why overtime had increased.

The ARC took no action, but I was hopeful that exposing the issue would dampen 

Amtrak’s enthusiasm for this deceptive practice. Unfortunately, it did not as excessive ‘‘fat’’ remains in schedules and Amtrak continues to issue statements regarding 

on-time performance that lack credibility. 

Please refer to the table below. I will reference the first train listed to illustrate 

the point. Amtrak’s eastbound Sunset Limited routinely takes 45 honest minutes 

when running over the 32-mile stretch of track from Los Angeles to Pomona, California. No on-time performance calculations are made on this train at this point. In 

recent years, however, Amtrak has added extra time to the westbound schedule 

from Pomona to the Los Angeles ‘‘checkpoint’’ so that it now takes 1 hour and 57 

minutes for the run—more than twice as long as the eastbound counterpart. Hence, 

passengers suffer the inconvenience of waiting for late westbound Sunset Limited

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trains in one community after another but official reports will show their train listed as ‘‘on time.’’

Amtrak’s long-distance on-time record of 61 percent for Fiscal year 1999 (a poor 

enough figure in itself) is simply not credible. The figure represents performance at 

about 32 checkpoints across the country, yet Amtrak served 510 stations. If we subtract these and other checkpoints we have about 470 non-checkpoint stations where 

trains could run an hour or more late yet be reported by Amtrak as being ‘‘on time.’’

Traditionally the pre-Amtrak railroads did allow a modest amount of additional 

time for trains at the end of their runs to allow a little bit of cushion to make up 

time. In 1952, to cite just one example, the Santa Fe’s westbound Grand Canyon

took 54 minutes between Chicago and Joliet, but eastbound took only 4 minutes 

longer. The minor schedule difference on the private railroad system was typical for 

that time. But over the years Amtrak has added prior-to-checkpoint ‘‘fat’’ to schedules to a degree unprecedented in the railroad business. 

Virtually every European and Japanese railroad schedules trains as expeditiously 

on final ‘‘checkpoint’’ segments of routes as they do on originating legs.


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Attachment 5: Acela Express Now 3 Years Behind Schedule 

I’m in a difficult position in speaking about the Acela Express because I’ve worked 

for high-speed rail in America since my first report on the subject was published 

in 1969, I’ve testified in favor of appropriations to Amtrak for the Acela Express and 

the train is a welcome and needed improvement. Yet I am disappointed by this 

train’s many delays and remain unconvinced by Amtrak’s explanations. 

Amtrak’s decision to develop the Acela Express was a mistake. Amtrak should 

have purchased off-the-shelf technology, like the Swedish-Swiss X2000, which Amtrak had successfully tested in the early 1990s. The specifications could have been 

altered to meet U.S. rail safety standards, the trains would have been built in this 

country, and Americans could have been riding high-speed trains for several years 

now. 

When The Washington Post exposed Acela’s design flaws last year, Amtrak announced a ‘‘six-month delay’’ in service. In fact, the Acela Express has experienced 

delays that are far more significant. Perhaps the extent of delays are unrecognized 

because the facts are difficult to locate in information databases—the name of this 

train has been changed from Metroliner to American Flyer and now Acela Express.

Following are Amtrak’s own words regarding delivery dates for the Acela Express.

Chronology of Delivery Delays Since Projected April 1996 Date 

May 19, 1993: Amtrak initiates procurement of high-speed trainsets, stating in 

news release number ATK–93–24, ‘‘To pre-qualify, a firm must demonstrate that it 

. . . possesses the necessary resources to deliver 2 complete trainsets by April 1996 

and the remainder of the trainsets within 2 years thereafter . . . . With completion 

of the New York-Boston improvement program in 1997, Amtrak plans to operate 16 

high-speed Metroliners each business day between Boston, New York and Washington, with trip time between Boston and New York in less than 3 hours.’’

November 3, 1993: New train slips a bit to middle of 1996. Amtrak stated in news 

release number ATK–93–57 that ‘‘Amtrak plans to award a contract by the middle 

of 1994 with the first trains being delivered 2 years later.’’

March 17, 1994: The program slips to early 1997. Amtrak testifies before a House 

Committee that ‘‘Two advance versions of the trainsets are expected in early 1997 


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69

for testing. The remaining 24 trainsets will then go into production, with the final 

trainset arriving in 1999.’’

October 6, 1994: Amtrak reiterates 1997 for first train. Amtrak announced in 

news release number ATK–94–83 that ‘‘The 26 high-speed trains will attain top 

speeds of 150 miles per hour and serve become [sic] Amtrak’s Northeast Corridor 

Metroliner Service fleet of the 2lst century . . . . The procurement award is expected in early 1995 with delivery of 2 test trains in 1997 and the remainder during 

1998 and 1999 . . . . It is expected by the year 2000 that more than 3 million additional passengers will be attracted to the service.’’ This document also reiterates 

promises made by Amtrak many times that New York-Boston travel time will be 

reduced to ‘‘under 3 hours.’’ But the latest Acela Express Boston-New York travel 

time estimates are between 3 hours and 10 minutes and 3 hours and 20 minutes, 

depending on the frequency of stops. 

November 21, 1995: Associated Press, reports on Acela Express delays: ‘‘The race 

to build America a new generation of fast passenger trains is running late . . . . 

Two years ago, Amtrak said it hoped to award the contracts in early 1994.’’

March 15, 1996: Associated Press reports that Amtrak selected the consortium to 

build the trains, which will ‘‘go into service by 1999.’’ The report of the 1999 delivery 

date fails to reference prior delays and the mistake goes unnoticed. Newspapers 

across the country run a photo of a model of the American Flyer.

March 11, 1998: Amtrak reiterates the 1999 date but refers to 2000 for completion 

of delivery. Amtrak CEO George Warrington testifies before a House Committee 

that ‘‘Five trainsets will be delivered in late 1999, with the remaining 13 by July 

2000.’’

March 10, 1999: Amtrak Chairman Tommy Thompson, in testimony before a Senate committee, reiterates the 1999 date, saying, ‘‘Amtrak will phase in the Northeast Corridor’s high-speed rail program late this year.’’

September 2000: Amtrak indicates that the Acela Express launch is ‘‘late October’’

after a year of announcing ‘‘early Summer,’’ then ‘‘mid-August,’’ then ‘‘sometime in 

September.’’

The Unknown Cost of Acela Express Delays 

Amtrak has repeatedly said that Acela Express revenues will enhance its bottom 

line but by what amount is unclear. Amtrak gave an estimate of $125 million to 

the Council as the expected annual revenue. Next, Amtrak CEO George Warrington 

said before a House Committee on March 11, 1998: ‘‘This new service will add, at 

a minimum, $150 million in revenues when fully deployed.’’ Further confusing are 

reports in a November 1999 Trains magazine and subsequent Washington Post and 

Associated Press stories stating that Amtrak expects the trains to contribute another $180 million in income. 

Which Amtrak number should we believe—$125 million, $150 million or $180 million? Whatever the figure, when I served on the Council we questioned Amtrak as 

to how it will make up the revenue shortfall. Amtrak stated that it would implement a combination of cost avoidance and revenue enhancements that will offset the 

expected loss in Acela Express revenue in fiscal year 2000. No details were forthcoming as to how Amtrak will accomplish that. 

Prior to the latest delays, the DOT Inspector General’s 1999 and 2000 assessments of Amtrak examined the reasonableness of Amtrak 5-year projections for the 

Northeast Corridor and estimated passenger revenues to be significantly lower than 

Amtrak’s estimate. The differences are, in part, because the IG calculates the diversion of passengers from air and automobile travel to the Acela Express trains at a 

lower rate than does Amtrak. 

For the record, a 3 hour and 10-to-20 minute Boston-New York Acela Express 

schedule, while good, isn’t the ‘‘grand leap’’ needed for high-speed rail to be truly 

air-competitive. To put Amtrak’s best train in historical perspective:

• The Acela Express can operate at 150 miles per hour between New York-Boston, 

but will run that fast on only 52 of the route’s 231 miles.

• Japan’s first Bullet Trains, which are now in museums, offered faster trip times 

in the 1960s than Amtrak’s Acela Express will offer in 2001.

• In 1950 the New Haven Railroad’s Merchants Limited linked New York-Boston 

in 4 hours without the benefits of full electrification, tilt-train technology and 

advanced signaling systems. For Amtrak’s Acela Express to run only about 45 

minutes faster after Amtrak has spent billions of dollars on the project is an 

example of Amtrak’s inability to bring truly air-competitive high-speed rail service to America. 

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Terms & Liabilities of Acela Express $1 Billion Loan Remain Secret 

Questions arise as to the degree to which Amtrak has publicly disclosed Acela Express costs to oversight bodies and taxpayers. It appears that Amtrak may have 

been unduly induced by an agency of the Canadian government to select Acela Express equipment manufactured by the Canadian-based Bombardier Corporation in 

preference to more proven technologies such as the X2000, which Amtrak had tested 

with great success in the early 1 990s. According to an Ottawa Citizen story on 

March 18, 2000, ‘‘The federal Export Development Corp. (EDC) secretly loaned $1-

billion to the deficit-plagued U.S. railroad agency Amtrak while the Chretien government sharply cut passenger rail funding in Canada. The money allowed the U.S. 

government-owned Amtrak to side-step a congressional cap on capital grants . . . 

The loan package has been a closely guarded secret. As of the end of 1998, the $1-

billion was still owing. Officials from Bombardier and Amtrak declined to disclose 

details about the deal. Details of the EDC-Amtrak loans are not disclosed in EDC 

annual reports or financial statements ....’’ While there is nothing inherently improper with a Canadian government loan, the 

secrecy has induced the sense that Amtrak has something to hide. I question whether this transaction has potentially handed U.S. taxpayers a $1 billion liability. 

To my knowledge, the ARC was never informed of a loan from the Canadian government, the uses to which it was put, the principal amount owed, the interest rate, 

the repayment schedule, other terms and conditions, or its effect on Amtrak’s financial condition. Are the Acela Express trains serving as collateral? We don’t know. 

There is much we don’t know about this loan. 

Congress should insist upon greater transparency regarding this loan and the liabilities it imposes upon the public treasury in a liquidation proceeding. This issue 

of transferability of Amtrak liabilities to taxpayers is a serious one, especially as 

Amtrak would become a candidate for a ‘‘complete liquidation’’ should the Council 

find that Amtrak will fail to meet its goal of operating self-sufficiency by the end 

of fiscal year 2002 (i.e., after September 30, 2002). 

In 1997, prior to the Acela Express loan, Amtrak claimed that liquidation costs 

could range between $10 and $14 billion. A GAO March 1998 study entitled ‘‘Issues 

Associated With a Possible Amtrak Liquidation’’ pointed to uncertainties in estimating Amtrak’s potential liquidation costs, saying, ‘‘Should Amtrak’s financial condition force it to file for bankruptcy, it must do so under chapter 11 of the Bankruptcy Code.’’ The GAO was unable to confidently estimate Amtrak’s likely liquidation costs but did state: ‘‘In our opinion, the United States would not be legally liable for secured or unsecured creditor’ claims in the event of an Amtrak liquidation. 

Therefore, any losses experienced by Amtrak’s secured and unsecured creditors 

would be borne in full by the creditors themselves or their insurers. Nevertheless, 

we recognize that creditors could attempt to recover losses from the United States.’’

As far back as March 18, 1985, the GAO issued an opinion that ‘‘legitimate differences of opinion exist with respect to questions about the rights and obligations 

of the United States in the event of an Amtrak bankruptcy.’’

Attachment 6: High-speed Bond Bill Is Seriously Deficient 

Acela Express Delays Warrant Bringing Private Sector Into High Speed Rail 

Amtrak has taken seven years to design, build and test the Acela Express while 

passenger railroads in other countries have completed such projects in only 4 years. 

Amtrak has taken seven years to upgrade existing infrastructure, while other nations build all-new high-speed tracks and put them into operation in 4 years. 

(Japan, France and Spain have performed such feats in that time.) 

The Acela Express symbolizes Amtrak’s inability to launch truly modem railroad 

passenger service in a timely fashion. Amtrak’s management and organizational culture are poorly suited to building and operating truly advanced train systems. This 

bill reinforces Amtrak’s de facto monopoly in intercity rail, which is sure to have 

a chilling effect on new entrants that would otherwise emerge. Should our country 

ever build advanced-technology, high-speed trains on other routes, we should give 

priority to regional agencies, public-private partnerships and joint ventures over 

Amtrak participation. 

Amtrak’s Claim That It Will Ease Aviation Congestion Is Unscrupulous 

Amtrak is overselling its high-speed rail program to lead the public to think its 

future trains will be as speedy as the spectacular high-speed lines found overseas. 

The German railroad’s objective for high-speed trains is that they provide travel 

‘‘twice as fast as the automobile, half as fast as the airplane.’’ Amtrak won’t come 

close. 

71

One of the arguments for high-speed rail is that we can divert passengers from 

air travel to trains, thereby freeing up slots at congested airports. But that’s doubtful on Amtrak’s best line. While the Acela Express will be faster than current train 

service, and indeed the train will lure air travelers, the number who will shift to 

rail remains a question. The DOT Inspector General’s 1999 assessment took issue 

with Amtrak revenue forecasts, stating that $154 million in Northeast Corridor passenger revenues through 2002 is ‘‘at risk of not materializing because of lower-thanforecasted diversion of passengers from air and automobile travel to the new Acela 

Express service.’’ Amtrak’s zeal to torture the English language to ‘‘re-define’’ what constitutes a ‘‘high-speed’’ train is most pronounced for its trains in the Southeast, Midwest and 

West. Amtrak ‘‘high-speed’’ trains in many cases will offer travel times that will be 

no faster than passengers found in the 1950s and earlier. Such trains won’t be able 

to compete with the speed of air travel. Thus, after billions are spent from the High 

Speed Rail Investment Act, I believe that the resulting passenger diversion rate 

from air would be very small. I doubt a single flight would be removed anywhere 

in our aviation system. 

Amtrak may also spend a portion of the finds on routes that are excessively long 

(e.g., Washington, D.C. to Jacksonville, Florida) where there is no way—not now, 

not ever—that even the fastest high-speed trains could compete with air travel. No 

executive I’ve ever met on a single high-speed rail operation overseas has ever proposed a route that long, at 753 miles, when high-speed mail’s effectiveness falls 

after a distance of 300 miles. The bill is a major step backward because it seriously 

misleads the American people, will institutionalize Amtrak’s second-rate planning, 

and will inhibit development of the kind of fast corridor train service America needs 

on selected high-population-density corridors. 

Objectionable Features Regarding Goals, Finances 

Passage of the bill is unjustified because the bill is deceptive in its promise to 

Americans and contains objectionable features. I say this because the funds will not 

necessarily go to build high-speed rail systems, the costs will be higher than Amtrak 

claims, taxpayers will be left liable for another Amtrak bailout, and the bill establishes a conflict-of interest regarding the Secretary of Transportation. Addressing 

these issues:

• Cost estimates are virtually nonexistent for the projects this bill would find. Appropriate estimates need to be in place to permit proper consideration of granting Amtrak access to billions of dollars through still one more federal support 

mechanism. The legislation does not deserve passage on this point alone. Consider what the Amtrak Reform Council, GAO and DOT Inspector General have 

stated:

GAO, in the report issued in May of this year entitled ‘‘Amtrak Will Continue 

to Have Difficulty Controlling Its Costs and Meeting Capital Needs,’’ stated that 

Amtrak has not prepared a multi-year capital plan since 1997 and Amtrak has 

not yet developed cost estimates for developing high-speed rail corridors outside 

the Northeast.

ARC, in its ‘‘Preliminary Assessment of Amtrak’’ issued in January, stated: ‘‘Amtrak has not produced a proposed long-term capital expenditure plan for 

several years . . . A corporation such as Amtrak, however, should have prepared and updated a long-term capital expenditure plan on an annual basis as 

part of its strategic business planning process and overall corporate management. The GAO and the DOT IG have repeatedly identified in reports and in 

Congressional testimony the need for Amtrak to prepare a long term capital expenditure plan for management purposes that will allow appropriate federal officials to make informed decisions concerning Amtrak. The Council also needs 

a long-term capital expenditure plan for Amtrak (updated at least annually as 

part of Amtrak’s strategic business planning process) to carry out its statutory 

obligations

DOT IG Office, it its report ‘‘2000 Assessment of Amtrak’s Financial Performance 

and Requirements,’’ issued on September 19, 2000, stated: ‘‘Amtrak must develop 

a realistic plan for addressing long-term capital needs. Amtrak has historically prepared a 1-year capital plan that reflects a level of spending commensurate with its 

expected annual appropriation. Amtrak needs a well-developed long-term plan that 

identifies all capital needs, their costs, their timing, and priority.’’

• The financial package is premature because Amtrak is under a congressional 

mandate to prove it can operate without federal subsidies by September 30, 

2002, and the Amtrak Reform Council is far from completing its evaluation of 

72

Amtrak’s performance. Considering that Amtrak was a candidate for bankruptcy merely 3 years ago, concerns about Amtrak’s financial stability should 

not be taken lightly.

• Proponents claim that the cost of the bill in the form of tax credits in lieu of 

interest payments will total $2.3 billion. My understanding is that’s misleading 

because 20-year bonds are permissible. It’s likely that as late as 2010 Amtrak 

will issue bonds that will expire in 2030. The cost of the legislation will probably be more than double what Amtrak claims, or more than $4.6 billion if Amtrak is ‘‘successful.’’ I note that the Heritage Foundation issued a report on August 28 describing the federal government’s implicit interest payments, concluding that ‘‘The loss of tax revenues to the U.S. Treasury would total $16 billion if interest rates remain unchanged at 8 percent.’’

• By transferring tax-credit costs from Amtrak’s books to Treasury Department 

ledgers, the bill creates massive subsidies to Amtrak that again will be ‘‘offbook’’ for Amtrak. Such deception frees Amtrak to again claim financial ‘‘suc- cess’’ despite the continuing drain on taxpayers.

• Amtrak claims that the proposal is sound because finding will be managed by 

an independent trustee and repayment will be assured by a guaranteed investment contract. But it appears that these measures apply only to the 20 percent 

state share, not the 80 percent federal share. Thus, the preponderance of the 

funds would remain at risk. Is that a prudent process considering Amtrak’s dismal fiscal history and flirtations with bankruptcy?

• The bill grants the Transportation Secretary authority to prescribe regulations 

about how certain financial transactions are reported to the public even though 

the Secretary sits on the Amtrak Board of Directors and holds Amtrak fiduciary 

responsibilities. This is an obvious conflict of interest.

The inescapable conclusion is that the bill is a stage-setter for another multi-billion-dollar federal bailout of Amtrak in future years. With hindsight as a guide, it 

is virtually impossible that Amtrak will be able to pay off bond principal and interest. The GAO has observed several times that Amtrak has a history of not meeting 

its financial goals. Bailouts have occurred with Amtrak’s government-guaranteed loans, as explained previously. The $2.2 billion IRA-sponsored ‘‘income tax refund’’ is a partial bailout, because a portion of the funds is being used to pay off Amtrak 

debt incurred before the TRA was passed. No justification exists to pass the High 

Speed Rail Investment Act in its present form. 

Attachment 7: Proposed Congressional Actions 

Congress is justified in undertaking the following: 

Initiate Investigations 

• Investigate Amtrak’s misleading comments to Congress on labor/management 

productivity. The best method to accomplish this is probably through a GAO 

study. This is extremely important considering that employee costs are the largest single element in Amtrak’s operating costs, according to various studies.

• Investigate Canada’s $1 billion Acela Express loan by requiring Amtrak to supply the still-secret details of the loan to this Committee. Congress should know 

the uses to which the funds were put, the amount of principal and interest, the 

potential liability to the U.S. government in a default, whether the Acela Express trains serve as collateral for the loan, and other terms and conditions that 

may be germane.

• Determine for public view the true extent of Amtrak’s continuing costs to the 

public. Accomplish this through a GAO study to quantify all direct and indirect, 

past and current federal subsidies. The review should include all liabilities buried in U.S. Treasury accounts for past taxpayer-financed bailouts of Amtrak. 

Establish Penalties for Failure to Cooperate With Amtrak Reform Council 

• Direct Amtrak to supply timely, accurate and germane responses to inquires 

from the Amtrak Reform Council and establish penalties for failure to do so. 

Amend ARAA to Tighten Reporting Requirements 

• Require Amtrak to annually submit to Congress the source for all new loans, 

the purpose of the loans, the terms and conditions of such loans, the collateral 

for such loans, and the interest and principal obligations incurred, repayment 

schedule, and amount paid during the year. The objective is not to dampen AmVerDate Apr 24 2002 09:19 Dec 10, 2003 Jkt 085968 PO 00000 Frm 00076 Fmt 6633 Sfmt 6621 S:\WPSHR\GPO\DOCS\85968.TXT SCOM1 PsN: CAROLT
73

trak loan activity but to increase transparency and knowledge of real and potential liabilities regarding Amtrak-incurred debt.

• Require Amtrak annual reports to clearly identify current subsidies as subsidies 

and identify the source of all subsidies. The objective should be issuance of reports that forthrightly explain the true extent of Amtrak’s revenues, costs, 

losses and subsidies.

• Require Amtrak to publish monthly on-time performance figures on a route-byroute basis. This would restore a statutory Amtrak requirement in place in the 

1970s (in the Rail Passenger Service Act, Amtrak’s enabling legislation) and is 

commensurate with government practice today regarding the commercial airline 

industry. 

Amend ARAA to Require Truth in Scheduling by Amtrak 

• Require Amtrak to establish consumer-friendly train arrivals and departures by 

readjusting schedules so that non-checkpoint communities are as likely to be 

served by punctual trains as official checkpoint communities where on-time performance is calculated. 

Decline to Pass High-Speed Rail Investment Act

• Decline to pass the High Speed Rail Investment Act, a bill that will not bring 

about high-speed trains in the Southeast, Midwest and West and will open taxpayers to future liabilities totaling billions of dollars. To effectively plan marketsensitive high-speed train systems, a new direction is needed to include participation by regional agencies, private businesses and joint ventures in innovative, 

imaginative public-private partnerships.

The CHAIRMAN. Thank you. Mayor Kaine, I would ask your indulgence for a couple of minutes. Senator Kerry would like to respond to the testimony of Senator Allard concerning an issue that 

affects his State, and if you would indulge Senator Kerry just for 

a few minutes while he responds, I would like to recognize Senator 

Kerry, and I thank you for your indulgence, mayor. 

STATEMENT OF HON. JOHN KERRY,

U.S. SENATOR FROM MASSACHUSETTS 

Senator KERRY. Mr. Chairman, thank you, and I apologize, Mr. 

Mayor. I thank you, also. I had not intended, frankly, to stay here 

this long because of other conflicts, and I have to get on a plane 

and leave the city momentarily, and so I appreciate the intervention, and I appreciate my Chairman and his characteristic courtesy. 

I want to comment on 2 things, if I may, but let me first say 

something, and I kind of hesitate to say this but I am going to say 

it, because I think that many of us in the Senate are increasingly 

frustrated by the way it sometimes works around here. 

I am the Ranking Member of the Subcommittee which Chairman 

Allard testified about today, and I regret to say that I had no notice or awareness whatsoever that this testimony would take place 

today. We learned only of the potential that it might by seeing the 

witness list, and I do not believe that is the way the U.S. Senate 

is supposed to work, number 1. It certainly is not the way I operated as Chairman of the Subcommittee when I was Chairman, nor 

will it be the way I will operate in the future, should that happen 

again. 

Second, it is really a kind of one-sided representation that just 

has no relationship to the facts that were presented to our Committee in the context of our hearings, and I would ask unanimous 

consent, Mr. Chairman, that the text of the exchange with Bay 

State between myself and a person representing the company that 

74

the graph showed had 116 million differential be made a part of 

the record. 

The CHAIRMAN. Without objection. 

Senator KERRY. I would ask unanimous consent that a letter 

from Bay State to the employees of the MBTA also be made a part 

of the record. 

I would ask unanimous consent that a letter to me regarding the 

eleventh-hour invitation to the one person who was allowed to testify to the contrary regarding the MBTA contract problems also be 

made a part of the record. 

[The information referred to follows:]

Senator KERRY. Thank you, Mr. Chairman. 

I have a copy of one of those letters that was sent and would ask that it be put 

in the record. 

The CHAIRMAN. It will be put in the record. 

Senator KERRY. In this letter, outside of the negotiating process, knowing that 

there is a union there, let me just clarify. Mr. Stoetzel, you did run the commuter 

rail system at the B&M for a period of time. Correct? 

Mr. STOETZEL. Yes, back in the mid-1980s. I was the general manager when it 

was operated by the Boston & Main Railroad prior to Amtrak taking it over in 1987. 

Senator KERRY. And I gather in fact that one of the prime people with the MBTA 

who was in charge of this contracting process used to work for you. Is that right? 

Mr. STOETZEL. There are actually several who were with me in Amtrak. 

Senator KERRY. So you’ve had a relationship with those people at the MBTA who 

have been part of this process. 

Mr. STOETZEL. Several years ago. 

Senator KERRY. Moreover, you have had a knowledge of the existence of 13 (c). 

This is not a surprise to you, is it? 

Mr. STOETZEL. No. 

Senator KERRY. And in fact, Bay State Transit—I’ve heard somebody—I think the 

Chairman said this company applied for a contract. 

What is the company? Is this a company that has employees today? 

Mr. STOETZEL. It has about ten employees today. 

Senator KERRY. At the time of the contract, I gather it had about 2 employees. 

Is that correct? 

Mr. STOETZEL. Yes, roughly. 

Senator KERRY. So you have 2 employees and you’re bidding $116 million below 

anybody else to do something that you have no work force to do. 

Mr. STOETZEL. But you’re bidding that on the basis of experience and on the basis 

of several other contracts, and on the basis of a very defined scope of work with 

the intent of hiring the work force. 

Senator KERRY. Sure, if the work force you’re going to hire is the existing work 

force, if they want to work for you. 

Mr. STOETZEL. It’s very similar to the situation that Amtrak was in when they 

took it over from B&M in ‘87. And they had no work force and they hired from the 

existing work force. 

Senator KERRY. It had a name then. It’s called union-busting, and it has a name 

today. It’s called union-busting. That’s fundamentally—the program here is that 

you’re going to come in and change the contract and get out from under. That’s essentially how you lower the costs. Most of these employees understood that. They 

saw that—when we talk about better benefits and better wages, et cetera, it’s my 

understanding that that offer was only made last month. Is that accurate? 

Mr. STOETZEL. No. The first offers were made in September. 

Senator KERRY. Were the first offers better? 

Mr. STOETZEL. The first offers—the difference between the first and second offers 

was slight and between the second and third, they’ve changed. 

Senator KERRY. I don’t believe the first offers had specific numbers, did they? 

Mr. STOETZEL. They had a wage range for the different positions. They didn’t have 

specific——

Senator KERRY. Mr. Moneypenny, did they have specific offers? 

Mr. MONEYPENNY. It said comparable. I can give you the package. It said comparable. 

Senator KERRY. Comparable. But were there any—what was the understanding 

of the workers with respect to that offer? 

75

Mr. MONEYPENNY. That you would have to give up your—you would have to go 

in alone, you would have no one to negotiate on your behalf. 

You would have to accept whatever this offer was, which was not explained to 

you. That you would have to have—and this really enraged our people—you would 

have to have a background investigation conducted upon you by this company with 

2 employees. 

If you worked 25 years at that job, and if you have, you worked for several different railroads. You worked for the Penn Central. You worked for the B&M. You 

worked for Amtrak. 

You would have to have these 2 individuals, whoever they were, do a background 

investigation to see if you were fit for the job that you already had. 

That’s what our people saw. 

And let me just correct one thing that Mr. Stoetzel said. There’s a big difference 

between when Amtrak took over in ‘87 and what these folks tried to do. 

Amtrak negotiated collective bargaining agreements with each and every one of 

the unions before they took over. And that’s what these folks could have done. 

The difference is that they probably couldn’t have done it for $175 million. 

Senator KERRY. That’s really the bottom-line issue here. What was the real cost 

of trying to run the transit system, recognizing that you had in existence since 1964 

a relationship where the federal government said that if federal dollars are expended on this system, there’s a certain expectation as to the relationship between 

the corporate entity and the people who work there. 

Now, listen. I understand. We’re all looking for cost savings. And none of us—I’m not sitting here suggesting that any kind of featherbedding practice or inappropriate 

numbers ought to be protected. 

That’s not what I’m suggesting. And I don’t think you are, Mr. Moneypenny. 

I think the question is, is there going to be a legitimate bargaining process that 

is respected so that people don’t feel that their rights are being trampled. 

Am I correct? 

Mr. MONEYPENNY. And there’s a practical reason for this, Mr. Chairman. 

The only place you get to be a railroad worker is on the railroad. It’s not like we’re going to get rid of your widget-makers and bring our widget-makers in. 

Mr. Stoetzel and the people he represents know darn right well, if it’s not our 

folks, there aren’t any other folks to do this work. 

It’s not like you have hundreds of railway workers around the country waiting to 

go to work. 

And I hear what you said, Mr. Chairman. Some of them are cleaners. I cleaned 

cars for 51⁄2 years myself. It’s a good way to make a living. And these people, they 

don’t break the bank on what they make. 

But there are also hundreds of highly skilled people who are very good at what 

they do. And to try and bring in a work force of hundreds of strangers and say, go 

ahead and run the commuter rail service, is an invitation to disaster. 

Senator KERRY. Mr. Stoetzel, let me ask you—and I don’t want to be unfair to 

either side here. 

Why has there not been the sort of direct kind of negotiation that Mr. 

Moneypenny is talking about? 

Mr. STOETZEL. Again, Bay State was attempting to hire a work force—

Senator KERRY. But one by one, by picking them off. Not with the union. 

Mr. STOETZEL. We had made elaborate plans to interview every single member 

of the existing work force, offer positions. And however they chose to organize, that 

would be the entity with whom we would deal. 

Bay State has been very consistent in that approach throughout. 

Senator KERRY. That’s outside of the law. The law required a different process. 

Let me read from your letter. Your letter says—here’s an individual letter received by a worker who knows he or she is represented by somebody to bargain for 

them. You’ve sent letters to their family. 

Here’s what it says. 

I am writing to you the third time to invite you to apply for a position with Bay 

State Transit Services to perform mechanical services for the MBTA. 

And then you go through a brief summary of these events. 

On October 28th, the rail unions met with the MBTA to begin the negotiation. 

Then you come down—what does all this mean to you? 

First, the rail unions and the MBTA have agreed to a process that will protect 

your rights under the 13(c) agreement. 

But if it really were protecting their rights under the 13(c) agreement, you’d be 

negotiating with the union, not writing them individually. 

Second, you say to them, applying for employment with Bay State will not affect 

your rights. 

76

In fact, the contrary may be true. Failure to apply for employment with Bay State 

could negatively impact your rights to 13(c) benefits. 

Now that’s a threat. 

Mr. STOETZEL. That was our understanding from the MBTA. And there was later 

an MBTA letter to the employees saying the same thing. 

Remember, we’re not a party to this 13(c) agreement. That’s what we were told. 

BAY STATE TRANSIT SERVICES

November 8, 1999

I am writing to you for the third time to invite you to apply for a position with 

Bay State Transit Services to perform mechanical services for the MBTA. Bay Suite 

Transit Services recognizes that the change in contractors for mechanical services 

at the MBTA may be causing uncertainty for you and your families. Several recent 

events have clarified the situation to your benefit and may assist you in your decision to consider employment with Bay State Transit Services. Below is a brief summary of these events:

• On October 28, the rail unions met with the MBTA to begin negotiation of an 

implementing agreement that may be required by the 13(c) agreement. This 

started a defined process that the MBTA and the rail unions will follow to resolve any 13(c) issues.

• On November 3, a 3-judge panel of the Suffolk Superior Court heard arguments 

from your rail unions, MBTA and Bay State regarding an injunction to prohibit 

Bay State and the MBTA from soliciting or hiring current employees involved 

in the mechanical services. On November 4, the 3-judge panel unanimously denied the rail unions’ request for a preliminary injunction because, among other 

things, the rail unions failed to establish a likelihood of success on the merits 

of their claims. Bay State is now free to continue its recruitment efforts.

• During the hearings, the MBTA stipulated in court that current employees involved in the mechanical services would nor forfeit or waive any of their 13(c) 

rights by applying for or accepting employment with Bay State. MBTA and the 

rail unions also agreed to expeditiously submit certain 13(c) issues to arbitration, if necessary.

What does all this mean to you? First, the rail unions and the MBTA have agreed 

to a process that will protect your rights under the 13(c) agreement. Applying for 

employment with Bay State will not affect your rights. In fact, the contrary may 

be true—failure to apply for employment with Bay State could negatively impact 

your rights to 13(c) benefits. 

Second, Bay State’s contract with the MBTA requires us to give priority consideration of employment to the current employees. More importantly, there is a sincere 

desire on the part of Bay State to hire as many of the current employees as possible. 

We have established an employment process that will ensure fair consideration and 

treatment for all applicants. 

We understand that you may still have many unanswered questions. We have included an information package that briefly describes positions available and wages 

and benefits. Other questions can be addressed during your interview. 

We understand that there were concerns that our previous offers to apply and be 

interviewed did not provide sufficient time for you to respond. Therefore, we are extending the deadline for receipt of applications until November 30, 1999. The acceptance of an employment offer from Bay State now will not affect your current employment. You will continue in your present position until Bay State begins providing services on March 1, 2000. 

Bay State Transit Services recognizes that you are an integral part of the past 

and future success of the MBTA commuter rail service. Please give us the opportunity to convince you that employment with Bay State can be a rewarding longterm experience. We look forward to the receipt of your completed application (additional copy enclosed) so that we may schedule your interview. 

Sincerely, 

RAYMOND V. LANMAN, 

President. 

77

O’DONNELL, SCHWARTZ & ANDERSON, P.C. 

April 24, 2000

Hon. JOHN KERRY, 

U.S. Senate, 

Washington, DC.

Dear Senator Kerry:

I was asked by my Rail Labor clients to provide you with background information 

in connection with a hearing regarding the Section 13(c) transit employee protection 

program being held tomorrow by the Committee on Banking, Housing and Urban 

Affairs. Although the hearing will address 13(c) protections in the context of the 

overall Federal Transit grant program, the Committee was prepared to receive testimony from witnesses who will present only one side of a dispute between the Rail 

Unions and the Massachusetts Bay Transportation Authority (‘‘MBTA’’) concerning 

MBTA’s plan to change the contractor for its maintenance of equipment work from 

Amtrak to Bay State Transit Services, Inc. Unfortunately, a formal attempt (see attached) by the Transportation Trades Department, AFL–CIO (TTD), to include, in 

addition to the Amalgamated Transit Union, both TTD and a Rail Labor representative among the witnesses scheduled to appear, was denied. But then today, at the 

eleventh hour, an invitation was issued to Charlie Moneypenny, International Representative of the Transport Workers Union. 

It is most unfortunate and, frankly, unfair that my clients were not given the opportunity to properly prepare for tomorrow’s hearing to present their side of the 

story and to respond to whatever charges or complaints are levied against the Rail 

Unions and their members by the MBTA and its contractor, Bay State Transit Service. The Rail Unions are not sure of the nature and scope of the Committee’s concerns, but they have some familiarity with questions that have been raised regarding this dispute. As such, on short notice I am providing you with this quick letter 

that briefly addresses certain questions that have been raised and that may resurface tomorrow. 

Question 1. On what basis could the Department of Labor and Department of 

Transportation find MBTA ineligible for federal funds?

Answer. Every grant agreement between MBTA and FTA since May 29, 1997 was 

subject to a condition that META bind its contractors to its ‘‘13(c) Agreement’’ with 

the Rail Unions. The Department of Labor imposed that requirement for eligibility 

for FTA funds in what became ‘‘Attachment A’’ to its certifications pursuant to 

former Section 13(c) (now Section 5333(b)) after full opportunity for briefing by 

MBTA and the transportation unions. MBTA opposed the requirement but the Department of Labor rejected MBTA’s arguments. After May 27, 1997, MBTA applied 

for and received a number of FTA grants all subject to the Attachment A requirement that provided:

The MBTA will ensure that any person, enterprise, body, or agency, whether publicly or privately owned, which shall undertake the management and/or operation 

of the system and/or provision of services, or any part or portion thereof, under 

contractual arrangements of any form with the MBTA, its successors or assigns, 

shall agree to be bound by the terms of the December 10, 1974 Section 13(c) Agreement, as supplemented, and accept responsibility with the MBTA for full performance of those conditions, and as a condition precedent to such contractual arrangements, the MBTA, its successors or assigns, shall require such person, enterprise, 

body or agency to so agree.

Again, it must be noted that this requirement was added to DOL certifications 

after a proceeding in which MBTA had the opportunity to submit argument to the 

DOL. Its arguments were rejected in the letter that promulgated Attachment A. The 

requirement was then imposed in every FTA grant after May of 1997. MBTA continued to apply for and receive federal funds while committing that it would comply 

with the DOL certifications, including Attachment A, even though MBTA opposed 

imposition of the requirement. 

However, MBTA did not bind its proposed new mechanical service contractor, Bay 

State Transit Services, Inc., to the 13(c) Agreement. In litigation before the Massachusetts courts, MBTA and Bay State both argued that Bay State was not a party 

to the 13(c) Agreement, was not bound by the 13(c) Agreement and had no contractual obligations to the Rail Unions and their members pursuant to the 13(c) Agreement. The Massachusetts courts made findings of fact consistent with those assertions. Indeed, those findings were a significant part of the reasoning behind the 

courts’ refusal to grant injunctive relief sought by the Rail Unions under the 13(c) 

Agreement. 

78

In short, the FTA grant agreement expressly and unequivocally required that 

MBTA bind its contractors to the 13(c) Agreement as a condition precedent to that 

agreement, and MBTA clearly violated that agreement and indeed admitted that it 

did not comply with that requirement after committing to it in order to receive millions of dollars in FTA grants. 

Question 2. Did MBTA have an opportunity to provide information regarding this 

dispute to the Departments of Labor and Transportation before any decision was 

made?

Answer. After the Rail Unions wrote to the Departments of Labor and Transportation, the Departments wrote to MBTA on December 17 and 20, 1999, stating that 

it appeared MBTA had not complied with the Attachment A requirement based on 

the State Court decision; and they requested an explanation from MBTA. 

MBTA preemptively addressed issues raised by the Rail Unions with a letter to 

the Secretary of Transportation on December 17, 1999, 3 days before the December 

20 letter was actually sent by the DOT. Then, MBTA responded with a 5 page letter 

dated December 30, 1999. MBTA responded to the Department of Labor’s inquiry 

with a 5page letter dated December 30, 1999. 

Thus, it is clear that MBTA had ample opportunity to provide information as well 

as argument on the issues before any conclusion was reached by the Departments. 

Question 3. Was the MBTA procurement process a legitimate competitive procurement process?

Answer. There are substantial issues as to whether there even was a truly fair, 

competitive and legitimate procurement procedure in this case. It appears that 

MBTA did not factor in to the weighing of bids the likely costs of employee protections if the Bay State bid was accepted as opposed to the Amtrak bid. Since this 

is essentially a labor services contract, any savings that might flow from a lower 

bid would necessarily come from reduced labor costs, thus implicating employee protection payments. Indeed, MBTA and Bay State acknowledged that Bay State plans 

to reduce the current work force by 130 or more employees. However, it does not 

appear that MBTA gave any consideration to those costs when it concluded that the 

Bay State bid would result in net savings of $116 million. A formal request to 

MBTA under FTA Circulars 4220,1B, IC and 1D for disclosure of information pertaining to the procurement process and the weighing of bids was never answered 

by MBTA. 

Additionally, from the time that Bay State was selected, the Rail Unions, members of the Massachusetts Legislature and others have asserted that the Bay State 

bid was unrealistically low and that MBTA would be required to pay more than 

what Bay State originally bid in order to provide the same level of service now provided by Amtrak. MBTA never provided any information that would demonstrate 

Bay State’s ability to provide the same level of service at the price of the bid. It 

appears that Bay State based its figures on the employee to rail car ratios on other 

commuter railroads and not on actual staffing projections for the MBTA shops. 

Among other things, such an analysis ignores the fact that MBTA has no central 

yard for the storage of its entire car fleet. This means that certain economies of 

scale available to other commuter rail operations are not available to the MBTA operation. This also means that MBTA must disperse its cars to outlying locations and 

keep workers at those locations to service and maintain the equipment. An example 

of the mechanical staffing implications of the MBTA system is that because local 

noise and air pollution concerns the cars stored at outlying points may not ‘‘idle’’

at night, but instead must be turned off; this requires that workers be available at 

these locations the next morning to perform necessary tests before trains go into 

service. In any event it is clear that Bay State’s staffing numbers were not based 

on actual plans for staffing particular locations with certain numbers of employees 

for certain shifts at specific locations. Efforts by the State legislature and the 

Unions to ascertain the basis for Bay State’s staffing plans were rebuffed. 

Recent events have only amplified the concerns of those who questioned the validity of the Bay State bid. It has been reported that many of the cost overruns on 

the Big Dig and Transitway projects have been due to un-budgeted payments to contractors who were awarded contracts based on low bids, but later sought supplements after beginning work. 

Question 4. Is there federal authority regarding the manner in which a workforce 

is hired or which union represents them?

Answer. Among the employee protections guaranteed by Section 13(c), current 

Section 5333(b)(2) are (A) ‘‘the preservation of rights, privileges and benefits (including continuation of pension rights and benefits) under existing collective bargaining 

agreements or otherwise’’ ; (B) ‘‘the continuation of collective bargaining rights’’, and 

(E) ‘‘assurances of priority of reemployment of employees whose employment is 

ended or who are laid off’’. These protections are implemented by the Department 

79

of Labor and negotiated agreements such as the 13(c) Agreement between the Rail 

Unions and MBTA. The 13(c) Agreement requires an implementing agreement concerning the selection forces and assignment of employees. And Attachment A to the 

recent DOL certification requires that Bay State be bound to the 13(c) Agreement. 

Morever, the Department of Labor’s letter promulgating Attachment A actually 

stated that one reason why it was necessary that contractors be bound by the 13(c) 

Agreement was that ‘‘if the applicant is not the direct provider of services, it cannot 

directly ensure continuation of collective bargaining rights, preservation of existing 

collective bargaining agreements, or priority of reemployment. Thus, in order to 

carry out these statutory requirements, the MBTA must require that any entity 

which undertakes the management and/or operation of the system and/or provision 

of services be bound by the protective arrangements.’’ Question 5. Did the Department of Labor inform MBTA that it would withhold 

FTA certifications because MBTA and Bay State had not guaranteed that Bay State 

would not change existing collective bargaining agreements, hire all existing workers 

or recognize existing unions?

Answer. The Department of Labor merely said that unless MBTA bound Bay 

State to the 13(c) Agreement as required by Attachment A, MBTA would be ineligible for future certifications. The DOL action dealt only with the refusal of MBTA 

to bind Bay State. 

Question 6. Why did negotiations between MBTA and the Rail Unions break down?

Answer. The Unions told MBTA that a pre-condition of any agreement would be 

that MBTA bind Bay State to the 13(c) Agreement as required by Attachment A. 

The Unions raised the Attachment A issue continually and at the outset of negotiations with MBTA. The Unions had serious problems with a number of positions 

taken by MBTA but they said that they would be willing to negotiate to attempt 

to resolve those issues; however they said they would not negotiate about something 

that MBTA was legally required to do, and that was fundamental to the entire process of negotiating an agreement involving a change in contractor. 

Question 7. Were there legitimate questions regarding the ‘‘technical capacity’’ of 

Bay State?

Answer. There were substantial questions as to the ability of MBTA and Bay 

State to provide safe and adequate service. Bay State has no experience whatsoever 

in providing mechanical services for a commuter rail operation, and its parent corporations have no experience in providing such services for a major commuter rail 

operation. While the parent corporations have experience in providing services to 

freight railroads, they do not have experience with a major passenger operation. 

One of Bay State’s parent corporations has experience with a small commuter rail 

operation, and that operation was cited as deficient in a number of areas in a FRA 

study several years ago. Additionally, as is noted above, the Bay State staffing plan 

on its face raises serious questions about its technical capacity. Furthermore, MBTA 

and Bay State so alienated the existing work force that there are substantial questions as to whether Bay State would have been be able to put together a work force 

with the requisite skills, experience and FRA certifications. 

Question 8. Did the Rail Unions attempt to communicate with Bay State regarding 

their concerns?

Answer. On May 18, 1999 the Rail Unions wrote to Bay State’s parent corporations advising them of the 13(c) Agreement, the history of their dealings with MBTA 

and the Unions’ position regarding the applicability of the 13(c) Agreement and its 

requirements to a change from Amtrak to Bay State. On June 3, 2000 the Rail 

Unions wrote to MBTA regarding the 13(c) Agreement and the obligation of MBTA 

and Bay State to continue employee benefits such as Railroad Retirement (a copy 

of that letter was sent to Bay State). On September 8, 2000 the Rail Unions wrote 

to MBTA noting that MBTA had for over 2 months failed to provide promised information regarding Bay State’s planned operations, the content of Bay State jobs, Bay 

State’s intended plans for selection for employment and wages and terms of employment, and MBTA and Bay State views as to employee rights under the 13(C) Agreement; a copy of that letter was sent to Bay State. 

Question 9. Did MBTA and Bay State make job offers to the Amtrak workers?

Answer. No. Bay State sent Amtrak shop employees solicitations for them to 

apply for consideration for employment with Bay State. The letters did not offer any 

jobs, indicate that the recipients would have any right to jobs, describe jobs that 

would be available, describe procedures by which employees would be considered for 

jobs, describe how Bay State would determine whether an Amtrak employee was 

qualified for a job, or describe an appeal process over denial of a job. Essentially, 

Bay State would pick and choose among the Amtrak employees in accordance with 

criteria established by Bay State. MBTA sent a letter to the Rail Unions, saying 

that, under a ‘‘priority of employment’’ all current Amtrak employees who ‘‘apply in 

80

a timely manner’’ would be ‘‘interviewed and considered for employment before Bay 

State hires any potential employees from the general public.’’ Flowever, Bay State 

would make the sole determination of applicant qualifications and there would be 

no appeal from any determination it makes. MBTA said Bay State believed that it 

would not be covered by the Railroad Retirement Act, would not deal with the Rail 

Unions, and would not assume any current collective bargaining agreement covering 

maintenance of equipment workers. 

Many Amtrak workers responded to Bay State by noting that Bay State had not 

actually made job offers, that they had rights under the 13(c) Agreement and that 

their unions would represent them. MBTA sent letters to Amtrak employees urging 

them to apply for consideration for employment with Bay State, but also threatening them that if they did not apply, they could lose both job opportunities and 

entitlement to any financial benefits under the 13(c) Agreement in connection with 

a change from Amtrak to Bay State. 

Question 10. What did MBTA and Bay State actually offer in the form of priority 

of employment to the Amtrak workers?

Answer. In July of 1999 MBTA said it meant only a right to be interviewed, but 

then said it meant a right of hiring for ‘‘qualified’’ employees’’. When the Unions 

asked about who would decide whether current workers are ‘‘qualified’’, how that 

determination would be made, and what rights employees would have to appeal 

‘‘disquaiifications’’, MBTA could not answer. Nor could MBTA answer the most basic 

questions about the number ofjobs that would be available with Bay State, the type 

of shop jobs Bay State would have, or whether operating employees who move the 

trains in the yard and track, signal and building maintenance employees would be 

included in a Bay State operation. 

At the end of October, 1999, MBTA said that Bay State jobs would all be called 

‘‘maintainer’’ jobs in which all employees could be assigned all shop functions, and 

that Bay State would contract-out coach cleaning work. Under the so-called ‘‘priority 

of employment’’, all current Amtrak employees who ‘‘apply in a timely manner’’

would be ‘‘interviewed and considered for employment before Bay State hires any 

potential employees from the general public’’. Bay State would make the sole determination of applicant qualifications and there would be no appeal from any determination it makes. MBTA and Bay State never told the Unions how prior experience and seniority in a craft would be considered in evaluating applicants. For example they could not explain how a twenty year machinist, a fifteen year electrical 

worker and a 22 year sheet metal worker would be evaluated for the same job. The 

employment applications sent out by Bay State made it clear that actual job offers 

would be complete on standards and terms dictated by Bay State. Ultimately, it became clear that there were no objective standards, no set processes and no appeal 

mechanisms in the employment mechanism envisioned by MBTA and Bay State. 

There also would be no Union and employee negotiations about, or even input into 

that mechanism; there would be only unilateral discretion vested in Bay State. 

Question 11. Was there reason for MBTA and Bay State to feel surprised by the 

Attachment A requirement?

Answer. MBTA had litigated the Attachment A issue and should have been fully 

familiar with its terms. All post-May 1997 FTA grants to MBTA were subject to this 

requirement. Additionally the Rail Unions brought the Attachment’s requirements 

to MBTA’s attention by letter dated July 13,1999. This letter was sent to MBTA in 

connection with negotiations with the Unions the planned change in contractor and 

was in part a request for information about Bay State’s plans Since MBTA was conveying information about employment with Bay State to the Unions, Bay State 

should have seen this letter even if a copy was not sent directly to Bay State. 

The Rail Unions feel that any inquiry into the issues that have arisen in their 

dispute with MBTA and Bay State should have allowed the Unions ample opportunity to prepare remarks arid to respond to questions and to claims made by 

MBTA and Bay State Since they were not given a meaningful opportunity to 

present their side of the story, the Rail Unions appreciate the opportunity that you 

have provided us to briefly address some of the key issues involving this matter. 

Sincerely, 

RICHARD S. EDELMAN, 

Counsel for the Rail Unions.

Senator KERRY. If I might also say for the record here, Bay State 

was a nonexistent entity. Bay State Transportation Services did 

not exist in Massachusetts, or Bay State Transit Services, prior to 

its bid on this particular occasion, and it bid, indeed, a differential 

81

between it and Amtrak, but may I point out to my colleagues there 

were only 2 employees. 

Two employees bid to undertake to provide commuter rail services, and they had no experience in doing that in our State. In fact, 

there were substantial questions as to the ability of the MBTA and 

Bay State to provide safe and adequate service to the 60,000 people 

who use our rail every single day. 

Bay State had no experience whatsoever in providing mechanical 

services for a commuter rail operation. Its parent corporation had 

no experience whatsoever in providing services for any major commuter rail operation, and while the parent corporation had experience in providing services to freight railroads, they had no experience with a major passenger operation. 

One of Bay State’s parent corporations had experience with a 

small commuter rail operation, and that operation was cited as deficient in a number of areas in an FRA study a number of years 

ago. 

Bay State’s staffing plan, on its face, raised serious questions 

about its technical capacity, and let me simply share with my colleagues what they did. They planned basically to break the union, 

and to violate section 13(c) and other standards by which negotiations take place. 

Now, you may not like negotiating with a union. You may not 

like some of the outcomes, but the law is the law, and they basically tried to circumvent the law, and in a letter that I have now 

placed in the record they actually wrote directly to employees, and 

this is their third letter. 

They say, ‘‘I am writing to you for the third time to invite you 

to apply for a position with Bay State Transit Services to perform 

mechanical services for the MBTA,’’ and then in a subsequent paragraph they say, ‘‘what does all this mean to you,’’ and then they 

define what the rail union’s position is, which is not an appropriate 

negotiating procedure, and they say, ‘‘Applying for employment 

with Bay State will not affect your rights. In fact, the contrary may 

be true—failure to apply for employment with Bay State could negatively impact your rights to 13(c) benefits.’’ That is a direct threat 

to the employees about what their status might be. 

This was a complete violation of negotiating standards of federal 

law. The court upheld the position of Amtrak, and I resent the notion that we are going to have some drive-by shooting in a hearing 

of the U.S. Senate to try to attack a contract when the facts are 

completely different from what we know here today, not to mention 

of what it has done in the context of senatorial courtesy. Mr. Chairman, I am frustrated and angry at this kind of approach, which 

has no place in the workings of an institution like this. 

A second point I want to make, this debate over Amtrak is also 

increasingly becoming more and more frustrating. You know, I 

have been here 16 years now, and most of those years on this Committee, not all of them, but I have heard people come in here and 

attack and attack and attack Amtrak and, indeed, there are reforms necessary. I have never sat here and been resistant to the 

notion that we cannot improve, and that there are not some bad 

practices, and that there has not been some mismanagement here 

and there. 

82

But to suggest that a governor with the qualities of Governor 

Thompson, who I think is the longest, now, elected governor in his 

state, and has had a remarkable record for efficiency, and other 

governors like Michael Dukakis and others who have a reputation 

for competency and concern, are not moving this thing toward a responsible status, is, I think, number 1 unfair, and number 2, discourteous. 

Second, when you analyze—— The CHAIRMAN. Senator Kerry, I recognized you to respond to 

Senator Allard. I would be glad to debate you, particularly when 

you are casting some aspersions on the people that as Chairman 

of this Committee I rely on more than anybody else, and that is 

the General Accounting Office and the Inspector General, so I 

would be glad to debate this with you, but I thought you asked to 

be recognized in order to respond to Senator Allard. 

Senator KERRY. I also said, Mr. Chairman, if I could just say, I 

did not have the opportunity to have an opening—— The CHAIRMAN. We have to go with the regular order of the appearance of Senators and Senator Wyden was here before you 

were. 

Senator KERRY. Are we going to have openings, Mr. Chairman? 

The CHAIRMAN. No. I have deviated from the normal procedure 

so that you could respond to Senator Allard. I am glad to hear that. 

If you would like to then wait your turn and have an opening statement—— Senator KERRY. Unfortunately I cannot be here. 

The CHAIRMAN. Unfortunately I cannot account for your personal 

schedule, but we have to go with the rules of the Committee. 

Senator KERRY. Mr. Chairman, fine, I will abide by the rules of 

the Committee and submit a statement for the record. 

[The prepared statement of Senator Kerry follows:]

PREPARED STATEMENT OF HON. JOHN KERRY, U.S. SENATOR FROM MASSACHUSETTS

Mr. Chairman, thank you for holding this hearing today. I think we have a good 

opportunity to learn that Amtrak is doing well, and remains firmly on its glide path 

toward operating self-sufficiency. As you well know, in 1997, we negotiated, we 

reached a compromise, and every member of the United States Senate agreed, by 

unanimous consent, to provide Amtrak with certain legislative relief and certain 

amounts of capital funding. In turn, we demanded that Amtrak become operationally self sufficient by the end of fiscal year 2002. 

Amtrak will testify that for FY 2000, it will require no more than the planned 

$362 million in federal support for operating expenses, which is $122 million less 

than last year. Now, I want to make sure something is very clear. Amtrak will fall 

short of the revenue it estimated in its strategic business plan. Amtrak is like any 

other business that will occasionally fall short of the estimated revenue. If we expect 

Amtrak to run like a private company, we have to expect that occasionally they will 

suffer setbacks. Mr. Chairman, one of the most respected high technology companies 

in the country, Intel, just announced that it would not achieve the revenue it predicted earlier in the year. These are normal setbacks that occur in any business, 

and in this case, such setbacks in no way suggest that Amtrak is not going to satisfy 

its target date for operational self-sufficiency. 

More importantly, Amtrak will also testify that it just had its best summer ever, 

breaking revenue records and showing steady increases in ridership. It’s also seen 

good results from its new satisfaction guarantee—with 995 customers out of 1000 

satisfied with Amtrak’s service. Mr. Chairman, I think it is very safe to say that 

none of our domestic air carriers have a 99.5 percent rate of customer satisfaction. 

We should be very satisfied with these results. 

Nevertheless, while I feel confident that Amtrak will be able to achieve operational self-sufficiency, we still need to do more to ensure that Amtrak has the capVerDate Apr 24 2002 09:19 Dec 10, 2003 Jkt 085968 PO 00000 Frm 00086 Fmt 6633 Sfmt 6621 S:\WPSHR\GPO\DOCS\85968.TXT SCOM1 PsN: CAROLT
83

ital it needs to provide the services its customers demand. I was proud to be an 

original cosponsor of an outstanding piece of legislation my friend Senator Lautenberg introduced, the High Speed Rail Investment Act, which addresses those needs. 

There is no shortage of supporters for this bill. In addition to the 54 cosponsors in 

the Senate, we have endorsements from state governments across the country, editorial boards from California, to Pennsylvania to Texas, and organizations from the 

Sierra Club to Morgan Stanley. 

I hope this bill becomes law this year, because this country needs to develop a 

comprehensive national transportation policy for the 2lst Century. So far, Congress 

has failed to address this vital issue. What we have is an ad hoc, disjointed policy 

that focuses on roads and air to the detriment of rail. The minuscule amount we 

spend on rail compared to other countries is unconscionable. In 1995, only 4 countries, Tunisia, Hungary, Saudi Arabia and Bulgaria spent less than the US on rail. 

The amount of federal money spent on aviation in Fiscal Year 2000 is almost ten 

times what was spent on passenger rail, and the amounts spent on highways almost 

thirty times as much. Mr. Chairman, if we want one answer as to why our highways 

are so crowded and our skyways have become just as grid-locked, I think we can 

turn to the appallingly low level of attention the United States Congress has given 

to passenger rail. Because of our neglect, people simply cannot use rail to the extent 

they want to, or should be able to, and are therefore flying or driving on short trips 

that could and should be taken by train. 

Mr. Chairman, I want to address an additional issue which I believe the witnesses 

may raise today. There has been some attention given to Amtrak’s contract with the 

Massachusetts Bay Transportation Authority for commuter rail maintenance services. Amtrak has been criticized for entering a 3-year contract, and has even been 

encouraged by members of the United States Senate to shorten the length of the 

contract. I find it ironic that some individuals who want Amtrak to run more like 

a business would tell them to enter a contract that would be bad for Amtrak’s bottom line. 

The extended contract between the MBTA and Amtrak was necessary because the 

MBTA and Bay State Transit Services were unsuccessful in their attempts to avoid 

federal labor responsibilities, break the unions that represent the maintenance 

workers and threaten individual maintenance workers into wage and benefit cuts. 

Because of these actions, Bay State Transit Services could not find any qualified 

workers to perform the maintenance work to comply with their MBTA contract. Because Bay State was unable to fulfill its contract, the MBTA asked Amtrak to accept 

an extension. Only Amtrak was in a position to provide commuter rail maintenance 

services after that date. 

The problems that the MBTA has endured in their attempts to contract out the 

commuter rail maintenance contract were simply due to their own attempts to avoid 

compliance with existing federal labor responsibilities. The framework that the federal government, transit agencies and unions have successfully used over the past 

generation, called ‘‘Section 13 C,’’ has preserved transit workers’ collective bargaining rights, established sensible rules for negotiations between unions and management, and has preserved the rights of employees who have been adversely affected by changes in the industry. The results of this partnership are clear. Americans now travel more than 38 billion miles on mass transit each year. More than 

10 million Americans use mass transit for their daily commute. This growth in mass 

transit would not have been possible without stable relationship between the 

unions, transit agencies and the federal government. Future growth in mass transit 

would be imperiled without this framework—and I am personally committed to preserving the fairness in the transit marketplace that has made that growth possible. 

Mr. Chairman, Amtrak is making great strides in moving toward operational selfsufficiency and running more like a business. Congress should not undercut the 

progress that has been made so far and should give Amtrak the tools it needs to 

continue moving in the right direction. 

I look forward to hearing from the witnesses.

The CHAIRMAN. Thank you very much. 

Mayor Kaine. 

STATEMENT OF HON. TIMOTHY M. KAINE, MAYOR OF

RICHMOND, VA, ON BEHALF OF THE U.S. CONFERENCE OF 

MAYORS, BOISE, ID 

Mr. KAINE. Thank you, Mr. Chairman. My name is Tim Kaine. 

I am the mayor of Richmond, Virginia. I am pleased to be here 

84

today on behalf of the United States Conference of Mayors, which 

is the bipartisan organization representing 1,100 cities and the 

mayors of those cities whose populations exceed 30,000. 

I also speak on behalf of Mayor Pat Owens of Grand Forks, 

North Dakota. There was a reference earlier to why would Grand 

Forks, North Dakota, support this bill, they must have been promised something. They initiated their support of this bill because 

they are on a feeder passenger rail line to Chicago. They were not 

arm-twisted to do so. 

I would like to tell you briefly why passenger rail matters greatly 

to America’s cities, and why America’s mayors strongly support 

Senate bill 1900. All of you, I know, recognize the growing problem 

that the country faces as a result of gridlock on our highways and 

winglock in the air. My 100-mile drive from Richmond this morning 

took me more than 3 hours. 

We have all experienced delays and frustrations that travelers 

experience in today’s overstressed transportation systems, but I 

would like you to know that we mayors, in addition to experiencing 

it personally, also have a really critical stake in this transportation 

issue. It is one of our major preoccupations. That is because we 

own and operate, together with our county counterparts, nearly all 

of the airports in the United States, with our county partners we 

own and operate about 80 percent of the road system in the United 

States, and either with county counterparts or in regional agencies 

we own and operate more than 90 percent of the Nation’s transit 

systems, buses, subways, light rails and trolleys. 

With this stake in the ownership of these critical transportation 

venues, mayors from across the Nation and also including a vocal 

public believe that our future transportation investment decisions 

must increasingly emphasize passenger rail, and particular intercity passenger rail service. It is an undeniable fact that voters are 

also coming to this conclusion. 

This is why mayors are now saying it is time to take the next 

step in national transportation policy and restore a balance to our 

system. We believe this is accomplished by building a third leg to 

accompany the federal investments in airports and highways to 

promote this national rail service that can connect in a high-speed 

fashion between our metropolitan economies. 

At the Mayors Conference we have begun to focus on identifying 

the critical elements of a rail policy for the Nation for this new century, and we are trying to look at ways the Nation can reverse a 

couple of generations of neglect and inattention to the rail infrastructure both for passenger and for freight needs. 

Just 10 days ago in Boise, I joined with more than 50 of my colleagues from around the Nation at the conference’s fall leadership 

meeting. The conference’s president, Brent Coles of Boise, Idaho, 

dedicated a significant portion of this mayors leadership agenda to 

the issue of rail in America, and the need for additional investment 

in our infrastructure. 

In preparing for these sessions, we looked at what is happening 

throughout the United States. For example, today in 47 of the 50 

largest metropolitan economies there is either plans or construction 

of new rail projects, be they regionalized or localized. These 

projects are most commonly light rail or commuter rail projects. 

85

To put these in perspective, I would note that these 50 metro 

economies account for over 53 percent of the Nation’s total economic output, and around the country totally the number of rail 

starts for projects is astounding, with more than 200 projects underway and another 200 contemplated in more than 30 States. 

Local areas are now committing billions of local dollars to rail 

projects, which makes us all the more concerned about the vitality 

and strength of the intercity passenger rail linkage. These local rail 

projects with local bus and intercity bus connections will link passengers to a national rail network and vice versa to form a more 

seamless transportation system. 

Again, what is noteworthy about these programs is the extent of 

the local investment, which exceeds 50 percent in many of the 

projects, and shows the level of local commitment. Clearly—we 

talked about at the mayors’ conference this ‘‘railvolution’’ that is 

now underway in America’s cities, and it is largely being driven on 

a local level. Increasingly, there is an emerging consensus among 

the mayors that this investment in intercity linkage between these 

local systems can help us achieve important social objectives, not 

only economic development, but improve mobility and choice, cleaner air, and smarter growth. 

Mr. Chairman, the Nation’s mayors have no choice but to focus 

most of our efforts on the local problems and issues, but we see a 

powerful linkage between a strong Amtrak, a growing national 

intercity passenger system, and the long-term viability of our local 

economies. That is why America’s mayors have made this rail system restoration in Senate bill 1900 a top priority. 

To put it simply, we are enthusiastic about high-speed rail. We 

believe that, when fully funded, high-speed rail partnerships that 

have been formed between Amtrak and some 28 State already will 

spark a revolution in the 21st Century transportation. High-speed 

rail will boost the economy’s productivity, increase safety, create 

jobs, and enable our highways and airports to fulfill their potential 

better, and by connecting downtown business centers served by rail 

it will help local officials to use high-speed rail and other investments to grow smarter in their regions. 

In conversations with our European counterparts, we have been 

impressed by their accounts of how high-speed rail has helped revitalize their metropolitan economies. We are convinced that highspeed rail will make a big difference to America’s cities as well. 

I cannot let the occasion pass, in conclusion, without commenting 

briefly on the strong partnerships between the cities and Amtrak. 

Today, Amtrak serves 45 of our Nation’s 50 largest metropolitan 

economies, and we see real efforts by Amtrak to work in partnership with local areas. In Richmond, for example, Amtrak has committed to restoring train service to downtown Richmond, a train 

service that had moved into the suburbs 20 years ago. That is 

being done in concert not only with our city, but also with our Commonwealth of Virginia. 

We see positive trends on revenue and ridership. We are excited 

about the Acela service which is promised for Richmond and points 

immediately south of Washington. Thank goodness North America 

is finally joining the rest of the industrialized world in deploying 

high-speed trains. 

86

As I know you have gathered from my comments, I believe that 

the future is bright for rail passenger service in America, but it will 

take more energy, more commitment, and more investment to deliver the services that the public expects. Most importantly, a balanced transportation system requires you and your colleagues support Senate bill 1900. 

Mr. Chairman, again I would like to thank you and the Members 

of the Committee for allowing me to appear today. I know reference 

has been made earlier to the endorsements that have been received 

by Amtrak for Senate bill 1900, and if they have not been offered, 

I would like the permission of the chair to go ahead and offer these 

to the Committee. 

The CHAIRMAN. Without objection, they will be included in the 

record if you like, Mayor Kaine. 

Mr. KAINE. Thank you. I appreciate that. 

[The prepared statement of Mr. Kaine follows:]

PREPARED STATEMENT OF HON. TIMOTHY M. KAINE, MAYOR OF RICHMOND, VA, ON

BEHALF OF THE U.S. CONFERENCE OF MAYORS, BOISE, ID 

Mr. Chairman and Members of the Committee. 

I am Timothy Kaine, Mayor of Richmond, Virginia. 

I am pleased to appear here today on behalf of The United States Conference of 

Mayors, a national bipartisan organization representing mayors of the more than 

1,100 cities with a population of 30,000 or more. 

I’d like to tell you, very briefly, why passenger rail matters greatly to our cities, 

and why America’s mayors strongly support passage of the High Speed Rail Investment Act, S. 1900. 

All of you, I’m sure, recognize the growing problems our country faces as a result 

of gridlock on our highways and ‘‘winglock’’ at our airports. 

All of us have experienced the delays and frustrations associated with our nation’s overstressed transportation systems. 

But I’d like all the distinguished Members of this Committee to know that we 

mayors don’t just read about these transportation challenges in the newspapers— and we don’t just experience it occasionally. We live it every single day. It’s one of 

our major preoccupations. 

That’s because we own and operate many of the nation’s airports—and with counties, nearly all of them. 

With our county partners, we own and operate more than 80 percent of America’s highways and streets. 

And, locally or in regional agencies, we own and operate more than 90 percent 

of the nation’s transit systems—buses, subways, light rail and trolleys. 

Because we’re on the front lines of America’s transportation systems, we can’t just 

sit around and wait for others to solve our problems. We have to take the initiative, 

and must confront these challenges. 

Yet, we know that to be successful, we must have partnerships to help move resources to where they are needed. 

Mayors from all across the nation, and many others, including a growing and 

more vocal public, believe that our future transportation investment decisions must 

increasingly emphasize passenger rail. It is an undeniable fact that the voter is becoming more frustrated with their transportation options. 

And, Mr. Chairman and Members of this Committee, I am sure that you would 

agree that the mayors are particularly attuned to this disenchantment. 

This is why mayors are saying that now is the time to take the next step in national transportation policy and restore balance and vigor to our national system. 

We believe this can be accomplished by building the third leg of the stool: a national 

rail system that connects between and within our metropolitan economies. 

At the mayors’ Conference, we have begun to focus on identifying some of the critical elements of a rail policy for the nation as we enter this new century. And, to 

look at ways this nation can reverse a couple of generations of neglect and inattention to our nation’s rail infrastructure, both for passenger and freight needs. 

Earlier this month in Boise, I joined with more than 50 of my colleagues from 

all across the country at the Conference’s Leadership Meeting. The Conference’s 

President, H. Brent Coles, the Mayor of Boise, dedicated a significant portion of our 

87

agenda to the issue of rail in America and the need for additional investment in 

this infrastructure. 

In preparing for these sessions, we looked at what is happening in throughout the 

U.S. For example, today, 47 of the 50 largest metropolitan economies are either 

planning or constructing new rail projects, be it regionwide or more localized systems. These projects are most commonly light rail or commuter rail projects. 

To put these areas in perspective, I would note that these 50 metro economies account for more than 53 percent of our nation’s total economic output. 

And around the country, the total number of rail starts is astounding, with more 

than 200 projects—and potentially up to 400—in more than 30 states. 

Local areas are now committing billions of dollars to local rail projects, which 

makes us all the more concerned about the vitality and strength of the nation’s intercity passenger rail system. These local rail projects, with their local bus and 

intercity bus connections, will link passengers to a national rail network, and vice 

versa, to form a more seamless transportation system. 

And what’s most noteworthy about these investments is the local share of the ‘‘new start’’ projects—which, on average, now exceeds 50 percent, showing the level 

of local commitment to rail investment. 

Clearly, there is what we call a ‘‘railvolution’’ that is now underway in America’s cities—and it’s locally, not federally, driven. 

All across America, our voters are demanding more choice and more balance in 

their transportation systems. More voices—and not just mayors and transit back- ers—are calling for an expanded national commitment to rail investment. 

And, increasingly, there is an emerging consensus that such investment can also 

help us achieve important social objectives. These include improved mobility and 

choice, cleaner air and smarter growth. 

Mr. Chairman, the nation’s mayors have no choice but to focus most of their efforts on local problems and issues. But we also realize that our urban transportation 

systems are part of a larger network. What the poet John Donne said—‘‘No man 

is an island, entire of itself’’—definitely holds true of our cities and their transportation systems, as well. 

We see a powerful linkage between a strong Amtrak, a growing national intercity passenger rail system, and the long-term viability of our local and metropolitan 

economies. 

That’s why America’s mayors have made ‘‘rail system restoration’’ a top priority, 

and strongly support the High Speed Rail Investment Act, S. 1900. 

To put it simply, we mayors are enthusiastic about high-speed rail. We believe 

that, when fully-funded, the high-speed rail partnerships that have been formed between Amtrak and some 28 states will spark a revolution in 21st century transportation. 

High-speed rail will boost our economy’s productivity, increase safety, create jobs, 

and enable our highways and airports to fulfill their potential. 

And by connecting downtown business centers served by rail, it will help local officials to use high-speed rail and other investments to grow smarter in their regions. 

In conversations with our European counterparts, we have been impressed by 

their accounts of how high speed rail has helped revitalize their communities. We’re 

convinced that high-speed rail will make a big difference to America’s cities, as well. 

Mr. Chairman, I cannot let this occasion pass without commenting on the strong 

partnerships between our cities and Amtrak. 

Today, Amtrak already serves 45 of our nation’s 50 largest metropolitan economies. And, we see real efforts by Amtrak to work in partnership with local areas. 

We see positive trends on revenue and ridership. And frankly, we’re excited—very 

excited—about the Acela service. Thank goodness North America is finally joining 

the rest of the industrialized world in deploying high-speed trains! 

Mr. Chairman, as I’m sure you’ve already gathered from my remarks, I believe 

the future is bright for passenger rail in America. But it will take more energy, 

more commitment and more investment to deliver the services that the public expects. 

And, most importantly, a balanced transportation system will require that you 

and your distinguished colleagues support S. 1900. 

Mr. Chairman, once again I’d like to thank you, and the Members of this Committee, for the opportunity to appear before you today.

The CHAIRMAN. Thank you for being here, and thank you for 

your stewardship of what is one of the most beautiful cities of 

America. I enjoyed very much visiting there. 

Mr. KAINE. We would love to have you any time. 

88

The CHAIRMAN. Thank you, mayor. 

Before I begin my questioning, I would like to put this in the context of the concerns of some Members of this Committee. Amtrak 

was established in 1971. Within 2 years it was going to be self-sufficient. We have spent $23 billion, and again we enacted legislation 

a short time ago that was again going to free it of all federal subsistence. 

There is an argument that can be made that was alluded to by 

Governor Thompson and other witnesses that perhaps we should 

have a federally subsidized railroad system in America. I think 

that debate should be held, but we have the 2 most respected arms 

of government, at least from this Chairman’s point of view, the Inspector General of the Department of Transportation and the General Accounting Office who cast serious, serious doubts on our ability, on Amtrak’s ability to achieve the independence that we were 

assured of when we passed the last bill out, and now another $10 

billion is going to be requested to continue what I view as continued subsidization of Amtrak. 

I think we should decide either that we will have a federally supported, federal tax dollars even if Amtrak does not run through Arizona any more, or it certainly does not stop there, and for the good 

of the country my taxpayers should continue to spend their dollars 

and guarantee billions of dollars worth of bonds, or we should face 

up to the fact that it is unlikely, at least in the view of the General 

Accounting Office and the Department of Transportation Inspector 

General and me that it is very unlikely that financial, true financial independence can be achieved in the timeframe which we were 

guaranteed just a couple of short years ago in return for another 

bail-out. 

I have forgotten what number bail-out this is since 1971, but it 

totals to $23 billion since the Congress and the American people 

were assured in 1971 that there would be financial independence. 

All these years later, nearly 30 years later, and $23 billion later, 

it is understandable why some members might be a little cynical 

about the latest rounds of assurances. 

Mr. Carmichael, Governor Thompson, Mr. Warrington, you 

should be free to weigh in. Do you intend to take any action on the 

Inspector General’s recommendations? 

Governor THOMPSON. Mr. Chairman, if I might, first if I could respond to your proposition, we have only been in existence 18 

months, the new Amtrak Reform Board. Granted, it has been in existence for 29 years. Granted, we have got $23 billion at the same 

time that highways are getting $33 billion a year, airports are getting $14 billion a year. 

The CHAIRMAN. In all due respect, Governor Thompson, I tried 

to frame this discussion that there can be an argument, which you 

are making, for federal subsidization. 

Governor THOMPSON. I am not making an argument. I would just 

like to finish if I might, Mr. Chairman—and $6 billion for mass 

transit. 

When the Reform Board was set up, we were supposed to be authorized about $925 million a year. We have been receiving about 

$521 million, a little over half of what the authorizers said we 

89

should have in order to be self-sufficient. We still developed a glide 

path, Mr. Chairman, and every year we are going down. 

When we started we had a fiscal year infusion of $484, this year 

$362 million. Next year it is $242 million, the following year it is 

$189 million, and thereafter we will be, except for the excess retirement aid, which is an obligation that Congress has put upon us 

and said it would not be included in the operation, we are on that 

glide path. We are going to make that glide path. 

Mr. Mead made some arguments about our previous business 

plan. We went over those, and we have submitted a new business 

plan, and the problem we had this year, we have been on that business plan. The first year we made $500,000, the second year it was 

$8 million, this year we are going to be under that. The reason, we 

had assumed $150 million of high-speed Acela express. We did not 

get them. We will be having the first train sets shortly, within the 

next couple of weeks, and once we put that system in we will make 

up what we lost this year, and I can assure you we will be on selfsufficiency by the year 2003, fiscal year 2003. 

Now, saying that, without the capital, we never—I do not know, 

I was not involved in the original thing, but capital is something 

else. We do not have the capital to sustain a growth industry in 

railroads. 

The CHAIRMAN. Governor, I really appreciate your comments. It 

is the custom in this Committee to answer the questions posed by 

the Committee. I will repeat my question. What action does the 

board intend to take on the IG’s recommendations? 

Governor THOMPSON. We took action last week at our board 

meeting. We came in with a new business plan. We will submit 

that business plan to Mr. Mead and to you. In fact, it has been submitted to Mr. Mead, and that business plan takes care of the suggestions he made. 

The CHAIRMAN. I thank you. I thank you very much. 

Mr. Carmichael, would you like to comment, or Mr. Warrington, 

either one, in response to the question? 

Mr. WARRINGTON. Let me just say this, Senator. I personally 

have tremendous respect for Phyllis and Ken in particular, and I 

will tell you that Amtrak and our staff have worked very hard to 

work very cooperatively with Ken and Phyllis to get all of the facts 

out on the table, and during the first several years of our existing 

business plan I will tell you that we met or exceeded——

The CHAIRMAN. Again I would like to have an answer to the 

question posed by the Chairman, quote, what action does the board 

intend to take on the Inspector General’s recommendations? We 

have got to have the answers to the questions by the witnesses 

here. Please, I ask all the witnesses what action does the board intend to take on the Inspector General’s recommendations? 

Mr. WARRINGTON. Management made specific recommendations 

to our board of directors, and the board of directors has adopted 

significant updates and improvements and changes to last year’s 

plan, which is what Ken was working off of, to significantly, reduce 

the number of undefined plan actions over the next 3 years that 

we need to achieve. Many have to do with expense. Some have to 

do with revenue enhancements. 

90

The CHAIRMAN. Thank you. Could you submit in writing for the 

benefit of the Committee some of the actions that you have taken 

in response? 

Mr. WARRINGTON. We will give you all the details, Mr. Chairman. 

The CHAIRMAN. Mr. Carmichael, would you like to respond? 

Mr. CARMICHAEL. I will try to, Mr. Chairman. 

Ken’s report, and in all of these 20-odd years of trying to put together a national rail passenger system the report card is pretty 

much in that we organized it wrong to start with and it has not 

been able to accomplish many of the things Congress wanted and 

that the public wants, and so I cannot help but feel that we can 

sit here and talk about what to do with these recommendations, 

but we have got to reorganize Amtrak so that we know what it 

needs for a national operating system and we also know what it 

needs for its infrastructure business. 

I cannot see any of this information being relevant until we reorganize the business itself, and you instructed us in the creation of 

this Council that we were supposed to make recommendations to 

help them be self-sufficient and if they were not, then we were supposed to give you a reorganized plan for the new national system. 

I just say right now, I do not think they can cut $737 million worth 

of expenses that Ken was talking about, not without doing some 

radical reorganization of the corporation right now and coming 

back to Congress with 2 different requests for funds, one for the 

infrastructure and one for the operating company, so I do not see 

any solution right now until they do something like that. 

The CHAIRMAN. That is very different from the way the proposal 

was made to Congress when we passed the last legislation, Mr. 

Carmichael, a very interesting departure. 

Mr. Warrington, how many money-losing routes have been cancelled since Amtrak received the authority to make its own routing 

decisions? 

Mr. WARRINGTON. I do not recall that any significant route reductions have occurred over the past 3 years. 

The CHAIRMAN. Have any routes been canceled? 

Mr. WARRINGTON. I know routes have been canceled, although 

our network growth strategy plan, which we unveiled on February 

1, did include a significant number of modifications and reroutes to 

tap into new markets both for passenger business as well as mail 

and express business. 

The CHAIRMAN. As part of the Taxpayer Relief Act of 1997, Amtrak received $2.2 billion to make capital improvements and maintain Amtrak’s equipment in intercity passenger rail service. I remember the language very well. 

A February report by the GAO said the Amtrak had spent substantial amounts of this funding to cover its cash-flow needs. These 

funds were actually spent on operating expenses, but Amtrak contends it will repay these expenses. What is the legal authority to 

borrow from the TRA funds, Mr. Warrington? 

Mr. WARRINGTON. We do have legal authority to borrow from the 

TRA, and over the course of the past, I guess, 21⁄2 or 3 years it has 

been very clearly articulated in our annual business plan and our 

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5-year plan, and we have repaid the TRA on schedule as intended 

in the plan. 

The CHAIRMAN. Mr. Mead, do you believe they have the legal authority to borrow? 

Mr. MEAD. Yes, I do. 

The CHAIRMAN. When does Amtrak expect to stop using TRA 

funds, Mr. Warrington? 

Mr. WARRINGTON. The board of directors last week approved not 

only our business plan, which deals with many of the issues that 

Ken has raised, but also our capital plan as a piece of that, and 

we would expect by the end of this next upcoming fiscal year that 

all of the TRA funds, the large majority of those funds will have 

been programmed or expended. 

The CHAIRMAN. How much money did Amtrak spend in support 

of the recent political conventions? 

Mr. WARRINGTON. I do not recall spending any money directly in 

support of the recent conventions. What we did do, which we do 

with many conventions across the country, is work with visitor and 

convention bureaus around discounts and promotions related to 

convention users accessing the sites by train. We did that in both 

Los Angeles and Philadelphia, but that is a common practice with 

all conventions in large cities across America, and it is a major revenue-raiser for us. 

The CHAIRMAN. A recent Wall Street Journal article written by 

Mr. Jeffrey Krassner writes that he tried to verify Amtrak’s claims 

about its on-time performance in the Boston-New York market. He 

said when he asked Amtrak for this data, Amtrak spokesmen told 

him the data was proprietary. How in the world could on-time performance be proprietary? 

Mr. WARRINGTON. It is not. I have no idea what that means, and 

we are very public and very open about the on-time performance 

of every one of our trains. 

The CHAIRMAN. I thank you. 

Governor Thompson and Mr. Carmichael, the House companion 

bill to S. 1900 includes a provision that reaffirms that any Amtrakissued bonds are backed by Amtrak only, not the U.S. Treasury. 

Such a provision would uphold current law, which according to 2 

rulings by the Comptroller-General, the federal government is not 

liable for any of Amtrak’s corporate obligations. Does the proposal 

you are working on with the Finance Committee include a similar 

provision? 

Governor THOMPSON. We are all in favor of it, Mr. Chairman. We 

have no opposition to that. 

The CHAIRMAN. Mr. Carmichael. 

Mr. CARMICHAEL. I would like to ask Mr. Mates, our economist, 

to comment on that. 

Mr. MATES. The majority of the Members of the Amtrak Reform 

Council support the freedom of other institutions to also issue 

bonds. 

The CHAIRMAN. Thank you. 

Ms. Scheinberg, Mr. Mead argues that it would require about 

double the $10 billion in bonding that may be achieved through S. 

1900 if these requests that Mayor Kaine, or these proposals that 

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Mayor Kaine wanted included in the record, is that a fair estimate, 

$20 billion as opposed to the $10 billion they are seeking now? 

Ms. SCHEINBERG. The problem, Mr. Chairman, is that nobody 

knows what the number is. We asked Amtrak that specific question, how much would it cost to develop these high-speed corridors 

around the country, and Amtrak could not give us an answer. I 

think $20 billion is a low number. It could be any number. Until 

people have an estimate, it is pretty hard to say what S. 1900 is 

going to accomplish. 

The CHAIRMAN. Go ahead, Mr. Carmichael. 

Mr. CARMICHAEL. I produced a table called Interstate II. We have 

one interstate system out here that is about 50 miles an hour, and 

in this country it has an opportunity for a second interstate system. 

I was involved back in 1989 to 1992 in the creation of these new 

5 high-speed corridors that were introduced in 1991. We have a 

43,000 mile interstate system across the country. It is very possible 

we could have a 20-something thousand miles intercity corridor 

system across the country. I would say to build a 20-something 

thousand miles interstate II high speed trains is going to cost several hundred billion dollars, and it is the type of thing, do we want 

it? These mayors seem to be saying they do want it. 

We are so hung-up on Amtrak’s failure to achieve what it has 

done that we are missing the point of what may be evolving here. 

There may be an opportunity now for a new surface transportation 

high-speed system across this country, and the corridors are emerging pretty fast. This $10-billion bond is maybe a step in the right 

direction, but we hope to give you some recommendations in January of how to fund a national rail passenger system, and also how 

to fund the emerging interstate high-speed systems. 

It is evolving. Amtrak is excited about it and trying to do it, but 

it needs to be approached in a different way. 

The CHAIRMAN. And your estimate is several hundred billion dollars? 

Mr. CARMICHAEL. That is right, for interstate II, high-speed 

intercity rail network. The corridors are sitting out there, beautiful 

corridors going right through the center of all of our cities. The 

freight railroads are beginning to say, we will work with you. They 

are doing it right here in Virginia between Norfolk Southern and 

the State of Virginia, so the stage is being set for this new interstate II system, and for this new high-speed corridor system. 

The question is, who is going to help build it? The State DOT’s 

are getting excited about it, and they want to build it. They built 

the old interstate system, and they are beginning to see the opportunity for building this other one. We have got to figure out how 

to fund it, and I think the American people want it and Congress 

is beginning to look at it. 

The CHAIRMAN. Well, I believe the taxpayers should have a better estimate than several hundred billion dollars, Mr. Carmichael. 

Mr. CARMICHAEL. I agree with that. It is as big as the interstate 

system. 

The CHAIRMAN. Mr. Mead. 

Mr. MEAD. My point in saying $20 billion, that is a low-ball, no 

doubt about it, was to put in context what is going on here. S. 1900 

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is a $10-billion revenue bond package that goes over a 10-year period, and it does not come close to covering the demands that are 

going to be made. 

With regard to that I would like to make 2 points. First, there 

are roughly 10 corridors, high-speed corridors, already designated 

in this country. There are another 8, which will bring the total to 

18 high-speed rail corridors in this country. All those 18 will be 

competing for roughly that $1 billion per year. That is point 1. 

Point 2 is Amtrak itself has extraordinary needs that are not 

classifiable as high-speed rail. So what if S. 1900 is passed, you 

should count on annual appropriations for Amtrak in addition to 

the $1 billion in bonding authority per year, and that number I 

would say would be in the neighborhood of $500 million to $700 

million per year in annual appropriations. That includes the excess 

retirement money that Governor Thompson was speaking about. 

The CHAIRMAN. Governor Thompson. 

Governor THOMPSON. Thank you, Mr. Chairman. Three quick 

points. First, I would like to introduce Governor Linwood Holton, 

who is on the Amtrak board. He got here a little bit late because 

he missed the on-time performance of our train. He got to the train 

depot a few minutes late, and it had already left, and I am happy 

that he is here. 

The CHAIRMAN. Welcome, Governor. 

Governor THOMPSON. First off, we are in the exercise right now, 

Mr. Chairman and members, of putting together a 5-year capital 

plan. We have been working on that for well over a year. We 

should have that completely developed, I would say, in the next 3 

to 4 months. Second, the $1 billion in S. 1900 is for high-speed corridors, the 4 high-speed corridors. Ken Mead is absolutely correct, 

if there are more high-speed corridors it is going to take more 

money, but we think we can do what is necessary to get the 4 highspeed corridors up with $1 billion a year. 

On top of that, we need other capital needs, there is no question about that, and $500 million to $700 million is an appropriate figure by Ken Mead. We are going to get most of that money from 

the high-speed things, but we are hoping that Congress will also 

recognize the need, if we want to develop the kind of railroad, national railroad system that is going to be profitable and is going to 

be successful we need to infuse capital. 

Our biggest problem has been the old equipment and trackage 

that does not warrant the kind of speeds that we would like to be 

able to put on them, and so we are improving our equipment, we 

are using all business techniques in order to do that, and we are 

doing a much better job than ever before of improving the equipment and the trackage, but capital is badly needed. 

The CHAIRMAN. I appreciate very much the job you are doing, 

and the job Mr. Carmichael is doing, and the job Mr. Warrington 

is doing. The problem that I have again is—and maybe it is a problem with being here too long—You keep coming back; and every 

time, this is it, it is over, this is all we need. The last legislation 

we passed, by 2002, it is over. You are finished. That was the 

promise in 1971. Here we are, 29 years later. That is the problem. 

I do not know if we would have passed the legislation last time 

if we had had the same testimony that we have today, several hunVerDate Apr 24 2002 09:19 Dec 10, 2003 Jkt 085968 PO 00000 Frm 00097 Fmt 6633 Sfmt 6601 S:\WPSHR\GPO\DOCS\85968.TXT SCOM1 PsN: CAROLT
94

dred billion dollars, at least $500 million, or $700 million for the 

next X number of years. 

I just think that Americans—and you make a strong argument, 

Mr. Carmichael, for high-speed rail corridors to relieve congestion—anybody who has tried to get on an airplane or has been 

stuck in traffic lately, recognizes, particularly out in the West 

Coast, as well as the East Coast, we need to have some kind of finite, definitive answer as to what is going to be needed, and then 

we can make an informed decision. 

No one expected, 2 years after passage, or 3 years after passage 

of the legislation, another $10 billion in bonding. I certainly did not 

expect it. Certainly it was never mentioned in testimony before this 

Committee when we did the bill. Please respond, and then I would 

like to go to Senator Wyden, or if both of you would like to respond, 

go ahead, Governor. 

Governor THOMPSON. Mr. Chairman, I was not here when it 

passed. 

The CHAIRMAN. I understand, but I was. 

Governor THOMPSON. I understand, and I accept your premise. 

All of the people that I have talked to on previous boards and previous management said there was never any indication that this 

was going to be for all the capital. Capital was separate. This is 

operationally self-sufficient. 

Now, we can argue about that, and I do not want to argue about 

it, but that is basically the position taken by Amtrak. We need capital. 

The second point is, is the authorizer said we were going to get 

about $984 million. We have been getting about $521 million. We 

are getting about half of what we expected under reauthorization. 

The CHAIRMAN. I would just like to mention real quick I am told 

the administration proposed that and Amtrak said that is fine. 

Governor THOMPSON. Well, that was fine operationally, but not 

with capital, and that was the difference. We have always been, 

and we are so close. We are on the cusp of making it operationally, 

but we never said we could make it without infusion of capital. We 

will be able to make 2003 if 1900 does not pass. We are going to 

make it, but we are not going to have much left over after that. 

We are not going to have a new railroad. We are not going to be 

able to have the high speeds. We need the capital in order to grow 

and be able to deliver to you, Mr. Chairman, the kind of railroad 

you want and America wants. 

The CHAIRMAN. I thank you. I have got to go to Senator Wyden. 

Can I ask Mr. Carmichael to respond briefly, and then I will go to 

Senator Wyden. 

Mr. CARMICHAEL. Senator, I apologize, but I believe it fits in here 

correctly. We have got 2 things that are confusing this. One, Amtrak’s core business, its core business now is running passenger 

trains with mail and express on a national system from Boston to 

San Diego. That is its core business. 

The Council would like to know how much capital and money 

does Amtrak need for its core business. Now, we are confusing 

something else with this, this infrastructure development. These 

other corridors that are evolving, they need capital from a different 

95

direction and different source, and who is going to build them, and 

who is going to be in charge of them and have responsibility? 

So in my mind, as chairman of the Amtrak Reform Council, I 

want Amtrak to concentrate on its core business, and I hope my 

Council will recommend in January a different funding mechanism 

for these corridors. The corridors are not capital they need. They 

need capital for the system. 

The CHAIRMAN. We will have another hearing in January as soon 

as you all finish your reports, and perhaps we can get a better handle on the situation then. 

Senator Wyden. 

Senator WYDEN. Thank you, Mr. Chairman, and Mr. Warrington 

I want to walk through with you the situation in Eastern Oregon, 

because it illustrates in my view how you continue to play politics 

with the way these routes are determined, and I want to go very 

carefully through it, because I find this very troubling, as somebody 

who has supported Amtrak for 20 years in both the House and the 

Senate, and sits here this morning, frankly, and finds himself 

agreeing with much of what the Chairman has said, so I am going 

to go through this very carefully with you. 

In May 1998 the GAO issued a report on the financial performance of the Amtrak routes. What this report essentially showed is 

that the decision to end the Pioneer in Eastern Oregon in May 

1997 was not a decision based solely on financial performance. Governor Thompson sat at that witness table at the last hearing and 

he agreed with that. He said the GAO was correct, that that was 

not a decision based on the merits. 

Mr. Chairman, I would ask the statement of Mr. Coston be made 

a part of the record. 

The CHAIRMAN. Without objection. 

[The information referred to follows:]

PREPARED STATEMENT OF JAMES E. COSTON, ATTORNEY, CHICAGO, IL 

Federal Infrastructure Funding: the Key to Success for Railroad Passenger 

Service 

Mr. Chairman, my name is James E. Coston. I am a former Amtrak employee, 

and between 1980 and 1986 I was the manager of an excursion-train and rail-travel 

business that was Amtrak’s biggest customer. At this time I am an attorney residing and practicing in Chicago, Illinois. On April 4 of this year I was appointed by 

Senator Daschle to the Amtrak Reform Council. My testimony today represents my 

personal views as a passenger-rail advocate and should not be construed as reflecting the thinking of the Council, its staff or any of its individual members. 

I would like to comment briefly—and, I hope, constructively—on the Inspector 

General’s report that we have been discussing this morning. 

The Inspector General has disclosed publicly what most fair-minded and informed 

passenger-rail advocates have been discussing privately for some time: that Amtrak’s capitalization, cash flow and expenses make it extremely difficult for this 

company to achieve the financial break-even which the 1997 Amtrak Reform and 

Accountability Act mandates must occur by FY 2003. Amtrak does not have, and 

never has had, the resources a business requires to perform such a feat. The 1997 

Act’s insistence on break-even by 2003 amounted to an unfunded mandate: It made 

stringent demands upon Amtrak, but it did not provide Amtrak—or any other entity—with the resources that had to be there if those demands were to be met. 

Why did Congress hand Amtrak this ‘‘Mission: impossible?’’

I see two reasons: 

First, in the closing days of 1997, many members of Congress were angry at Amtrak’s management for an ill-advised cost-control program that needlessly eliminated train service in several parts of the country and threatened losses of service 

in a number of others. The Chicago-to-Portland Pioneer, which enabled tourists to 

96

view the Blue Mountains of Oregon close up, was discontinued, even though Amtrak 

managers knew that adding a single car of mail to each departure would add 

enough revenue to keep the service operating. The Chicago-to-Los Angeles Desert 

Wind was dropped at the same time, ending all Amtrak service to Las Vegas and 

to the ski-resort country of southwestern Utah. 

As a Midwesterner I know that in early 1995 the states of Wisconsin, Michigan 

and Illinois were forced to turn to their legislatures for millions of dollars in additional subsidies just to keep a token Amtrak corridor service running. Even with 

those subsidies in place, fares had to be raised, causing ridership levels to plunge 

after several years of healthy growth. 

The effect on Amtrak’s relations with Congress was close to poisonous. In the closing days of 1997 Amtrak’s board brought in a new management which began to reverse course, but the damage was done: Congress’s understandable but unrealistic 

demands for reform were embodied in law. Only in compliance with that law could 

Amtrak get on with business. 

Second, in 1997 the ‘‘Contract with America’’ was very much in the air in Congress. There was a strong belief among many members that railroad passenger service, along with other programs historically provided by government, could be either 

privatized or forced into a private-sector model under government ownership. Many 

members apparently believed that of the 4 basic U.S. transportation modes—highway, inland-waterway, air and rail—one, the rail mode, could operate successfully 

by the rules of private-sector business while the other three continued to enjoy 

seven decades of abundant infrastructure funding from the federal government. 

In forcing that private-sector model on Amtrak, the 105th Congress compounded 

an error made by the 91st Congress when it created Amtrak under the Rail Passenger Service Act of 1970. 

The big mistake of the 1970 Act was to pretend that railroad passenger service—

uniquely in the transportation industry—could survive and grow under the rules of 

private business. Congress never made this demand on the nation’s other transportation modes. Our highways, inland waterways and civil aviation network all were 

established and funded by government and continue to be supported by massive 

government investment in their fixed infrastructure and their traffic-control systems. In those modes, only the operation of the common carriers is in the private 

sector. Government not only supplies and owns the infrastructure, but makes sure 

as well that the infrastructure is technologically state-of-the art so that the carriers 

using it operate at the highest possible degree of efficiency and financial performance. This is the meaning of the 3-year, $40-billion funding package that Congress 

voted in March to enable the Federal Aviation Administration to upgrade its airtraffic control system. 

When it comes to intercity rail passenger service, however, government is almost 

totally absent from funding of infrastructure and is making only the faintest attempts to catch up. So while America enjoys a 21st century highway system and 

a 21st century civil-aviation network, its railroad tracks cannot support even a 

1950s-level of passenger service. In fact, in the state of Illinois we are just now undertaking a set of state-sponsored track-and-signal improvements that in 2 years 

will enable Amtrak’s Chicago-St. Louis trains to reach 110 miles per hour. Yet the 

fact is that in 1936 passenger trains between Chicago and the Twin Cities were 

streaking along at speeds as high as 115 miles per hour—behind steam locomotives! 

Such are the absurdities that develop when government spends seven decades 

funding three types of transportation infrastructure while ignoring a fourth—and 

then attends to the fourth with too little too late. Let me remind you that as of 

this date, Congress still has not provided a funding mechanism that explicitly allocates a reliable supply of dollars to the construction and improvement of intercity railroad tracks and their command-and-control systems.

This is a scandalous omission in a nation obsessed with personal mobility. All of 

the other modes of transportation have enjoyed dedicated infrastructure funding for 

many decades:

• Federal dollars for highways have been flowing since the 1921, when Congress 

made its first commitment to connecting up the nation’s cities with hard-surfaced roads .

• Dedicated federal funding for barge canals, locks, dams and navigation aids has 

been in place since 1917, when President Wilson, using his wartime powers, 

seized the nation’s tiny barge and towboat fleet, established a governmentowned barge line and provided the first federal money for a long-term program 

of waterway improvements.

97

• Federal dollars for airports and air traffic-control systems have been flowing 

since 1926, when President Coolidge authorized the Commerce Department to 

erect beacons so pilots could fly air mail safely at night.

• There are federal dollars for urban and suburban mass-transit systems, and 

those dollars have been flowing—some might say trickling—since 1964, when 

President Johnson realized that four decades of cheap federal capital for streets 

and highways had left the privately owned transit systems and commuter railroads with no means of modernizing or expanding their services.

Yet intercity passenger rail technology, which holds the power to free our nation 

from its airway and highway gridlock, still has no dedicated infrastructure-funding 

mechanism of its own. Amtrak has a small budget to operate and market its small 

fleet of trains and receives periodic capital grants to upgrade the roughly 500 miles 

of track it owns—most of it in the Northeast Corridor—but the overwhelming majority of the trackage it uses is privately owned freight infrastructure that is not built 

to passenger-train standards and is in large part inadequate to handle even the 

freight traffic thrust upon it. 

Since the Congress has seen fit to impose a set of private-sector business rules 

on passenger rail while lifting its competitors on the strong arms of government, 

let me just share with you a couple of harsh lessons that all private businesses understand. 

Lesson number one: If a business is denied access to the capital required to update its technology and make its product competitive, the customers will not come. 

That has happened to Amtrak. Its trains are too slow so its customers are too few. 

Its share of the travel market is less than one per cent and dropping. Ridership 

growth is not strong enough to replenish market share. 

Lesson number two: Old technology costs more to operate than new technology, 

so businesses forced to keep using old technology have higher expenses than their 

state-of-the-art competitors. They spend more and more to accomplish less and less. 

This too has happened to Amtrak. This is why the Inspector General has pointed 

out that even though Amtrak’s revenues are rising, its costs are rising faster. Amtrak’s ‘‘revenue gap’’ is a direct result of its ‘‘infrastructure gap.’’ One can only speculate how much more effective, efficient, busy and profitable 

Amtrak would be if its Northeast Corridor infrastructure had access to only a twentieth of the federal funding that has been lavished since the 1930s on its Northeastern competitors: Reagan National Airport, Baltimore-Washington International, 

Philadelphia International, LaGuardia, Theodore H. Green and Logan airports, to 

say nothing of the four decades of funding expended on Interstate 95 with all of its 

incredibly expensive bridges, tunnels, interchanges and feeder highways. Those facilities became efficient people movers because those facilities were funded. 

As long ago as 1992, Professor Paul Steven Dempsey of the University of Denver 

estimated that our civil-aviation and highway infrastructures each represented more 

than $1 trillion worth of government investment at then current prices. The railroad 

infrastructure of our country is worth nowhere near that sum. Thanks to 103 years 

of federal railroad regulation and 83 years of federal capital investment in new infrastructures that compete with rail, the U.S. railroad industry has been conducting 

a century-long going-out-of-business sale. Double track has been converted to single 

track, high-speed signal systems designed for passenger trains have been removed, 

yards have been closed, stations demolished, platforms pulled up and superelevated 

track that once permitted passenger trains to pass through curves at 80 miles per 

hour has been leveled to accommodate freight trains traveling at 40 miles per hour. 

Particularly in the 55 years since the end of World War II, the American railroad 

industry has been managing for decline by downsizing its physical plant. 

Today, the nation’s eight-year economic boom has overwhelmed that antiquated 

plant with freight traffic the railroads cannot handle. Congested main lines and 

yards are blocking the progress of Amtrak trains and freight trains alike. Even the 

nation’s best railroad track, Amtrak’s Northeast Corridor, is basically an adaptation 

of an 1850s steam-railroad alignment that was upgraded during the 1920s with 

grade separations, in the 1930s with a partial electrification, and in the late 1990s 

with electrification of the remaining 150 non-electrified miles. Capital investment 

in the NEC has been inadequate, intermittent and subject to interminable debate, 

while capital investment in the parallel highway and civil-aviation systems has been 

lavish, Continuous and unquestioned. 

I know that some Members of this Committee may be under the impression that 

Amtrak too has benefitted from federal infrastructure investment and will benefit 

further if Senator Lautenberg’s High Speed Rail Investment Act is signed into law. 

That is true as far as it goes, but it simply doesn’t go far enough. The fact is, 

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structure on which most of Amtrak’s passenger trains run, has been capital-starved 

for the better part of a century now and is desperately trying to play catch-up 

against competitors that were given a huge head-start. Senator Lautenberg’s bill, 

while well intentioned, is a drop in the bucket—a pathetic $10 billion stretched over 

10 years. It barely acknowledges that the railroad infrastructure problem exists—

and Senator Lautenberg is supposed to be one of Amtrak’s biggest supporters! 

I don’t want to sound like a Pollyanna, but it almost looks as if Amtrak’s best 

supporter now is the Inspector General: He’s the only one who’s had the intestinal 

fortitude to get up in front of Congress and tell the truth: You can’t run efficient, 

effective, popular, profitable trains on an obsolete, inadequate infrastructure. You 

can’t sell from an empty wagon. 

Let me close with this thought: If today’s airlines tried to move today’s passenger 

volume using the airports and control towers and radar systems of 1955, the Inspector General would be writing about that industry the way he has just written about 

Amtrak. 

And if today’s motor carriers tried to move their 48-foot and 53-foot trailers of 

merchandise at 80 miles per hour down the 2-lane highways of 1955, that industry 

too would be the subject of a blistering IG report and some very embarrassing congressional hearings. 

Knowing that, should we really pretend to be astonished that our 1955-style passenger rail system is delivering inadequate financial performance? 

I challenge the ladies and gentlemen of this distinguished Committee to revisit 

the subject of America’s railroad passenger service not just in a critical light, but 

in a historical light. 

I challenge Congress to trace the problem back to its origins—a 70-year failure 

to capitalize an effective passenger railroad infrastructure while highways, waterways and airways held a toga party with the federal budget. 

And I challenge Congress and the administration not just to trace the problem, 

but to face the problem, by bringing rail passenger service into the big tent of federal infrastructure financing along with the highways, the waterways and the airways. Our passenger rail system has to look more like America. It has to look more 

like a federal transportation program and less like a 19th century railroad trying 

vainly to finance its infrastructure out of its own earnings. 

Rail passenger service will not survive, will not grow, will not exploit the full potential of its technology, and will not make its full contribution to the national mobility until it is financed by the federal government at the infrastructure level—as 

its competitors have been for 70 years. 

Mr. Chairman, as a resident of Chicago who flies more than 50,000 miles a year 

on business, I am acutely aware of the anguish experienced by the hundreds of 

thousands of travelers who were stranded at O’Hare this summer. As a frequent visitor to Washington, New York and the West Coast, I have frequently found myself 

cooling my heels in their airline terminals or stuck in traffic trying to reach those 

terminals. Like millions of other Americans, 1 have learned that our nation is suffering a mobility emergency. And like an increasing number of Americans, including 

the one who wrote this editorial called ‘‘Speedier Trains’’ in last Thursday’s New 

York Times, I know that a well planned, well financed and well managed intercity 

passenger rail system can alleviate our travel distress. No other industrialized nation is suffering a mobility crisis like the one we are experiencing in the United 

States. And the reason is that no other industrialized nation has staked its citizens’

mobility on air and highway travel alone. Rail is the critical third component, and 

we have to stop neglecting it. 

What we have to do now, Mr. Chairman, is identify the role passenger rail should 

play in our national mobility system, and then plan, fund and build the kind of passenger-rail infrastructure that will enable our trains to play that role. Our passenger-train system has to look more like America. It has to become a federal transportation program with a predictable and dedicated federal funding source. 

Amtrak can be a successful common carrier, but not until it achieves what the 

other common carriers have enjoyed for most of this century: an up-to-date infrastructure financed by a dedicated federal transportation infrastructure program. 

It is time—way past time—for our railroad passenger service to share fully in the 

federal infrastructure funding that has made the other modes so successful. I hope 

that the members of the Senate Commerce Committee will attend to that agenda 

in the next Session. 

Thank you.

Senator WYDEN. James Coston states, and I quote, ‘‘the Eastern 

Oregon train was needlessly eliminated.’’ Those were his words, 

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and he goes on to say that it could have been possible, by adding 

a single mail car, a single mail car, to have turned this into one 

that would have been a cost-effective run. 

Now, a baggage car costs, according to my staff, $300,000. I am 

not up on the exact cost of a mail car, but do you disagree with 

what Mr. Coston has said, (a) that the train was needlessly eliminated, which by the way was in line with what Governor Thompson 

said, and that (b) this could have been effective if a single mail car 

had been added? Do you disagree with Mr. Coston? 

Mr. WARRINGTON. I frankly am not well-enough acquainted with 

the facts about the economics of one express or mail car on that 

train and the kind of difference it would make, and I can confirm 

that subsequent to this, Senator, but my gut tells me that one express car, whether it be a road, rail, or mail car, probably would 

not make up the difference around the loss that we would be talking about, around a reactivated service. That is what my gut tells 

me, but I commit to you I will certainly take a look at that, but 

that does not sound right to me. 

Senator WYDEN. Well, I guess I find your answer troubling as 

well because we have got a proven track record that your agency 

has played politics with this train. The General Accounting Office 

said it, Governor Thompson said it, the Amtrak Reform Council 

said it and you come here and you say, well, I will have to get back 

to you. 

My constituents in Eastern Oregon pay a lot of tax dollars for a 

national rail system, and you folks are basically saying that if they 

want rail service in Eastern Oregon they ought to go out and have 

a bunch of bake sales and see if they can put it together. 

I have got those little towns actually levying per-head assessments in order to do their share to be part of the reinvented Amtrak, and I guess my question to you is, when are you going to stop 

playing politics with my constituents? 

Mr. WARRINGTON. I will be as straight as I can, Senator. First 

of all, I do not play politics with trains. The elimination of the Pioneer preceded me as the president of Amtrak, and I cannot speak 

to what the basis was for that decision. 

I will tell you, though, that generally, in retrospect, all of those 

eliminations back in 1995 and 1996 ended up costing the company 

more in lost revenue than we were able to take out in the way of 

expenses, given the fixed cost nature of the operation. I can tell you 

that I have committed and we have committed to look at all variations on a restored Pioneer, and as a matter of fact we have concluded that the most promising opportunity, as I think you know, 

is the Portland to Boise section, which would have about a $6 million loss with depreciation, about $41⁄2 million a year loss without 

depreciation, and we are very anxious to work with the States of 

Oregon and Idaho to see if we can bring that service back, but it 

will require contributions. 

I will tell you, over the past 2 years this is a zero sum game for 

Amtrak. We are under the gun. We have had a discussion here all 

morning about achieving operating self-sufficiency, and the pressure is on, and as a practical matter, given the fact that it is a zero 

sum game, in the end we have to have participation by more actors 

than just Amtrak and the U.S. Congress. 

100

Along those lines, frankly, over the past 3 years we have doubled 

the level of support from States for the operation of trains across 

this country from about $50 million a year to almost $110 million 

a year. I am confident that if we continue to work with the State 

of Oregon and the State of Idaho—I was out at the U.S. Conference 

of Mayors meeting a week and a half ago in Boise. There is incredible enthusiasm for that kind of a service, and not unlike elsewhere 

around this country, there are opportunities to do that. 

I see Senator Hutchison here this morning. We had a similar situation, back when the Pioneer was proposed for elimination, on the 

Texas Eagle, and the State of Texas stepped up and loaned Amtrak 

$5.1 or $5.2 million, and the service has really turned around, and 

the contribution level from that service has been extraordinarily 

positive, and looking forward, given mail and express opportunities 

not only to Laredo but conceivably to Monterey, it can be an extraordinary winner, but that was jump-started in a time of crisis 

by Senator Hutchison and the State of Texas. 

Senator WYDEN. Well, Mr. Chairman, I would like to get an answer to the question. The GAO said you played politics. Governor 

Thompson said the train should not have been eliminated. The Amtrak Reform Council said it should not be eliminated. Now you are 

saying that the only way the people of Oregon are going to get a 

train is if they, the city and the State legislature, come back with 

all the money. That is not acceptable if this is to be a national rail 

system. 

I am willing to make all these calls on the merits, and I have 

told folks in Eastern Oregon that if a train does not compute, if it 

does not compute, then that is the way it is, and they have met 

you more than half-way by levying these per-head assessments. We 

are going to go to the State legislature, but I for one am not going 

to accept an approach that says, essentially, after the train should 

not have been eliminated and it was eliminated for political reasons, they should do all the heavy lifting and the federal government should do nothing. 

So I guess, you are on your way, and I guess maybe you all are 

not very interested if you turn somebody who has been a supporter 

of this agency for 20 years into somebody who is going to continually, at every single opportunity, say it is time to drain the politics out of the way you make these routes. 

I think it is very unfortunate, the way you are doing business, 

and it is on your watch. It is one thing to talk about what was done 

in the past, but it continues on your watch. 

Governor Thompson, did you want to add anything? 

Governor THOMPSON. I do not know if I really want to get involved in this. Senator Wyden, I think I said that I was not here, 

and that may be true, and you may be more correct in saying it. 

I do not know, I was not here. George Warrington was not there. 

I do know that we put in, I think, $600,000 in the study, or 4 

or 5 or $600,000 into a study with your office in Oregon and Idaho. 

Our back is to the wall. We have to be able to be cost-sufficient and 

all the experts tell us we are going to lose $6 million with depreciation, $41⁄2 million without, and we are trying to figure out a way 

to come up with a solution, Senator Wyden, for you and for your 

constituents in Eastern Oregon. 

101

Senator WYDEN. Mr. Chairman, I want to finish with just one 

point again. You were here saying that you agreed with the GAO 

when the GAO said it should not have been eliminated, so that is 

something you said, so now this is your watch, and to tell my constituents again that they should do everything, that as part of a 

national rail system people in Eastern Oregon send dollars to 

Washington, D.C. and get nothing in return is unacceptable, particularly absent some evidence that this does not compute. 

This area, as you know, Mr. Warrington, is being featured in the 

New York Times constantly as one of the travel meccas of the 

United States, and yet we have not been able to get you all to even 

incorporate that into your analysis. 

I know the light is on. Thank you, Mr. Chairman. 

The CHAIRMAN. As usual, Senator Wyden, in your mild and reticent manner you have made your point, I think very forcefully. 

[Laughter.] 

The CHAIRMAN. Senator Hutchison. 

Senator HUTCHISON. Well, Mr. Chairman, I feel like the Texans 

at the Alamo at this hearing this morning. I just hope the result 

is not the same. 

Mr. Chairman, there is a lot of discussion about the past with 

Amtrak and what was the thought in 1971 when it was created, 

and what was the thought in 1997 when we had the reform act 

that was passed, but let me say, in relationship to what Governor 

Thompson has said, that operational self-sufficiency is what we intended with the 1997 act. It would be unrealistic to say, looking at 

any transportation system, that capital is not going to be part of 

the starting up of a truly Nation-wide transportation mode. 

There is no question that multimodal transportation options are 

good for all Americans. The citizens of Arizona are paying for capital expenditures in the transit systems of New York and Philadelphia and San Francisco, and we do not question—— The CHAIRMAN. And Phoenix and Tucson. 

Senator HUTCHISON. But we do not question that more goes to 

New York and San Francisco than Phoenix and Tucson. We do not 

question that. 

The CHAIRMAN. Yes, we do. We indeed do, all the time. In fact, 

that is the reason I voted against the last transportation bill was 

exactly that. 

Senator HUTCHISON. And I hope, Mr. Chairman, in the future 

that we will look at the potential for a national rail passenger system that is part of the multimodal option available to the people 

of this country, because I hope it will stop in Phoenix. 

The CHAIRMAN. Let me show you the proposal. It goes a lot 

through Texas, but there is a large portion of America that it does 

not go through. 

Senator HUTCHISON. And the reason, Mr. Chairman, is because 

we continue to have people who will not let it have the chance, 

with the right capital expenditures. I think Mr. Wyden—— The CHAIRMAN. These are the proposed ones, Senator Hutchison, 

not just existing. 

Senator HUTCHISON. Mr. Chairman, the Pioneer and the Texas 

Eagle both got official notice on the same day that they were going 

to be eliminated. They had the official notice given. I went to bat 

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to get the loan from the Texas legislature. It was not easy. It takes 

time to get things done. We got it. He tried, they did not get it, 

and that was the difference. 

Now they are further down the line because you have certain requirements for the number of cars that have to be gotten in order 

to provide the operation into Oregon, and those cars are now servicing the areas that did step up to the plate, but Mr. Chairman, 

when you look at our aviation system and our highway system you 

know that to keep up with the growth, and the economic growth 

in this country, we are going to have to have another mode of 

transportation. 

I would hope that we would have the vision to say yes, we are 

going to step up to the plate for the capital expenditures. We are 

starving Amtrak right now. We have an authorization of $1.058 billion for 1999. The appropriation was $600 million. You have heard 

it now several times that the appropriations have been about half 

of the authorized level. 

You cannot starve the operations and expect to have operations 

and capital growing. We cannot expect them to succeed with the 

mandate of the 2003 operational self-sufficiency if we do not give 

them the chance. This has the potential for a future that is every 

bit as important as our mass transit system, as our aviation system, and almost as important as our highway systems. 

The highway systems are the base, there is no question about it, 

but when you look at the federal funding by mode of our transportation systems, here is Amtrak since 1982, here is aviation, and 

here is highways. 

Now, I believe it is in our traveling public’s interest that we 

would have another mode of transportation. Right now, it is not 

truly national. It is not even half what I think it can be, but you 

know, it takes time. The transit systems are just now coming into 

being that are feeding into Amtrak, and that is going to add to the 

convention business. 

I applaud what Mr. Warrington is doing in conventions, and I see 

it in other cities where they go out with convention packages and 

they say, for two people traveling one person goes free. We can duplicate that for conventions, for sporting events, for tourists, and 

that is a marketing technique. 

Second, the States are beginning to step up to the line, but this 

takes time. Most State legislators meet biennially. It is going to 

take time to bring our States into the thinking that rail is a basic 

mode of transportation that will be a contributor to the system if 

we do not starve it to death before its time. 

So if I could just ask the question of Mr. Warrington, do you see, 

with these subsidies that are you getting, and I think very creatively with package and express delivery, do you see the time that 

we will be able to start clearly from not a truly national system 

today, but if we continue getting those kinds of subsidies from the 

package delivery and the mail delivery, will we be able to solidify 

the base we have in place today and go into some of these other 

places like Oregon, where it would be warranted to have a system 

put forward if the State legislature will work with Amtrak to do 

it? 

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Mr. WARRINGTON. Senator, I am very confident that in 2003 we 

will be at or very close to achieving our goal of operating self-sufficiency. It is purely a timing matter, the combination of getting our 

high-speed program launched and, as Governor Thompson said, we 

expect to take down the first Acela train set next week and put it 

into service within a month, and then 19 more after that. 

The combination of Acela high-speed service in the Northeast 

and exploding mail and express business across the system in partnership with the freight railroads, continuing to focus on service 

quality and consistency, which is a big revenue generator for us, 

and you have seen that over the past summer, and continuing to 

focus, as Ken and Phyllis have said, on cost structure—which we 

are religious about entirely, and it is not about trains, it is about 

back office systems and costs associated with the invisible stuff. 

You do not see behind the operation, and there is lots of opportunity that we have clearly identified. We will put all that together, 

and we will be at or very close to where we need to be by 2003, 

and the problem will be, we will get there and unless this capital 

problem is solved between now and then, frankly, it will all be for 

naught, and we will be wringing our hands about what a disaster 

we have wrought then over 34 years, or 35 years. 

And the prospect of that occurring within the context of extraordinary political pressure and economic pressure all over this country—I travel all over the place, and the thirst for this kind of service and success—and this is about choice and alternatives, practical 

choices and practical alternatives, across America. There is an incredible thirst for it out all across this country. 

The irony will be if we do not solve it as a matter of national 

public policy, investing in intercity and high-speed rail service in 

America—we will get at or close to where we need to get to. We 

will deal with a lot of Ken’s issues, but if we do not solve the capital problem it will all be for naught, and we will frankly be spinning our wheels over the next couple of years. 

The CHAIRMAN. Senator Hutchison, I have been informed the 

other side has objected to this hearing, and we were supposed to 

have stopped about 10 minutes ago. I apologize, but we have to adhere to the rules of the Senate. I was just informed of that. I am 

sorry about that. We will have another hearing in January, and I 

would ask the indulgence of my colleagues to allow Senator Cleland 

at least to make a comment, since he has been here. 

Senator HUTCHISON. Absolutely, Mr. Chairman, and I do hope 

that when we have the future hearings that you will be as relaxed 

as possible so we can have back-and-forth, because this is obviously 

a very important issue to you and to many of us, and we need to 

have all the facts out there on the table. 

Thank you. 

The CHAIRMAN. Absolutely. Senator Cleland, I apologize. I want 

to mention, it was over here that the hearing was objected to. 

STATEMENT OF HON. MAX CLELAND,

U.S. SENATOR FROM GEORGIA 

Mr. Chairman, today’s hearing has been called in response to the 

just-released report by the DOT Inspector General on the state of 

Amtrak’s financial performance. The report states, and I quote, 

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‘‘Without major corrective action Amtrak will not achieve operating 

self-sufficiency in 2003.’’ Today we will have the opportunity to 

hear more on the report’s findings and to hear Amtrak’s response. 

Let me just say that in poll after poll, Americans support a nationwide passenger rail system and further, they support government contributions to keep that system running. I am amazed over 

estimates that show that Congress has provided just enough support to keep Amtrak operating at the level of service it has offered 

for the past 29 years. Since its creation in 1971, Amtrak has received just $23 billion from the Congress, for an average contribution of $790 million a year. By contrast, Western European governments, in just 9 years, from 1980 to 1989, provided $101 billion to 

their railways. This is more than 4 times what Amtrak has received in the entire 29 years of its history. 

In a House hearing this spring, it was pointed out that several 

States across this country are appropriating funds to make improvements in their passenger rail service, even in the absence of 

federal matching funds. And no wonder: High speed rail is a viable 

alternative to 2 of the 21st century’s most challenging and frustrating problems, sprawl and traffic congestion. 

Mr. Chairman, the promise of high speed rail is critical in my 

state of Georgia. Why? Because our highways and skyways are approaching gridlock. Today Metro Atlanta has the very worst traffic 

congestion of any Southern city, and Metro Atlantans drive more 

miles than drivers in any other part of the country. Hartsfield 

International Airport, with 78 million passengers, is both the 

world’s busiest airport and the world’s most delay-impacted airport. 

Last year Hartsfield’s passengers collectively experienced over 4500 

days in lost time. High-speed trains offer another option—and 

Georgia’s commitment to rail is shown in its bottom line: a state 

budget investment of $45 million next year for passenger rail! And 

there’s more: Georgia is prepared to flex over $300 million from 

highway funds to passenger rail over the next 4 years. 

In closing let me say that we should look hard at providing Amtrak enough money to achieve the goals mandated by Congress: to 

provide national service and operate at a profit. One of the best 

ways to do this is to enact the High Speed Rail Investment Act. An 

investment in high-speed, high-quality rail will benefit commuters 

across this land by helping our nation change its focus from moving 

cars to moving people, from promoting sprawl to promoting smart 

growth. The future of our transportation system, and therefore of 

our economy, depends on far-sighted national statesmanship. 

Thank you, Mr. Chairman, and I look forward to hearing from our 

witnesses. 

Senator CLELAND. If I find out who on my side canceled this 

hearing I am going to wring their neck. 

[Laughter.] 

Senator CLELAND. Let me just say, I think Amtrak has been 

caught for the last 29 years in that conundrum, kind of catch-22, 

that meetings will continue until morale improves. 

[Laughter.] 

Senator CLELAND. In so many ways we have been starving you 

and then expecting you to perform, and I think you know the Yogi 

105

Berra comment, that is that when you get to a fork in the road, 

take it, is true, too. 

We are at a fork in the road, there is no question about it, and 

I think we are, Mr. Carmichael, confusing operations, quote, ‘‘subsidies,’’ with legitimate investment and infrastructure. Senator 

Hutchison is right. What company, what business, private or nonprofit, what entity, what organization would expect to grow, meet 

new market demand and so forth, without an infusion of capital? 

Let us face it, that has got to happen. 

I just came back from Japan. I was medivacced there 32 years 

ago, and did not get a chance to spend much time there then, but 

recently I just got back from Japan. I spent a few days there, 

talked to Ambassador Tom Foley. We all know that Japan was leveled in 1945, literally. I talked to one serviceman whose father said 

that he went into Tokyo September 2, 1945, after the signing of the 

surrender, and nothing was standing in Tokyo but the safes, just 

the safes. 

Now, 55 years later, after the Japanese have made a concerted 

effort to invest dramatically in their economy, and the things that 

boost their economy, a tremendous educational system and a massive infrastructure development program, particularly in terms of 

rail—Ambassador Tom Foley mentioned to me he was invited to a 

recent test of a magnetic levitation train in Japan that will go 320 

miles an hour. Now, they lost the war. 

In 1945 we had the finest rail system in the world, in the known 

universe. Japan lost the war, yet they have a world-class system. 

We won the war and we are sucking air between Richmond and 

Washington. I mean, that really does not make sense. 

So I think we are at a fork in the road. Most Americans support 

a nation-wide passenger rail system. They support government contributions, and we have been stingy in many ways to give you 

enough just to survive. 

I want to say Western European Governments have poured 4 

times the amount of money into their rail systems that we have. 

My State is willing to put in well over $30 million a year, and if 

we bring this plan to fruition here where we bring Amtrak in, the 

fast trains, 140 miles an hour down through the Carolinas to 

Macon, Georgia is willing to flex some $300 million in transportation funds your way. 

So my State is ready for you to come south. We welcome it, and 

especially all of those 78 million passengers who sit out on 

Hartsfield’s tarmac for an hour and a half. We are looking for options to ride somewhere on time. At Hartsfield, passengers clocked 

some 4,500 days in lost time last year, just at the Atlanta airport 

alone, the busiest airport in the world and yet the most delay-impacted airport in the world. 

So I think that we are at a fork in the road. It is time we invested in high-speed, high quality rail, which benefits the commuters across our Nation, that works on the problems of urban 

sprawl, and is part of our smart growth strategy. 

Thank you, Mr. Chairman. 

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times these things happen. Hearings are objected to for reasons 

that have nothing to do with the hearing. 

This is a very important hearing. I would emphasize again, after 

you are prepared to come back before the Congress in January or 

February and you will notify us we will have another hearing, and 

Senator Hutchison, it has been the practice of this Committee to 

have free give-and-take, and I will continue it in this hearing as 

well, and we would have continued, I am sure, for a long time. It 

is probably a relief to the witnesses that we are not, but if we not 

had this hearing objected to—— Senator HUTCHISON. Well, thank you, Mr. Chairman, because I 

had a number of followup questions, because if you look at the timing of this hearing, I do not feel like we did have a chance to make 

our case, and it is no fault of yours that the last half did not get 

the equal time, but at some point we cannot have a legitimate debate on this issue if we do not have both sides. 

And I hope that we will be able to settle in your mind and everyone else’s the issue of capital needs in order to give them the fighting chance to make that 2003 deadline, and I hope that we do set 

the base so that we will be able to spread out and have the truly 

national system that stops in Phoenix, too. 

The CHAIRMAN. It will be a cold day in Gila Bend. 

STATEMENT OF HON. OLYMPIA J. SNOWE,

U.S. SENATOR FROM MAINE 

Thank you. I would like to express my appreciation to the Chair 

for scheduling this hearing today. I hope it will give us an opportunity to highlight Amtrak’s successes as well as focus on the challenges Amtrak faces for the future. This Committee, we should remember, gave Amtrak 5 years to achieve operating self-sufficiency 

under the Amtrak Reform and Accountability Act of 1997, which 

was enacted December 2, 1997. The Act contains provisions designed to help Amtrak not require federal operating funds after the 

end of FY2002. 

For many years, I have been a supporter of Amtrak and would 

like to express my strong support for a national passenger rail system and the need to maintain a passenger rail system which is 

flexible and possesses the incentives necessary to become self-sufficient. 

Today, my home State of Maine is one of only a handful of states 

in the continental United States that is not served by passenger 

rail service. I am proud and excited that after a decade of hard 

work, negotiations, and a bit of heartache, Maine will find itself finally a member of the Amtrak family this spring. I thank Amtrak 

for working with me over the years to make this service a reality, 

and I very much look forward to riding the new Boston-Portland 

train. The State of Maine is also working on plans to upgrade the 

Boston-Portland line to a high-speed rail service in the future, and 

also may extend the line even further north to Lewiston-Auburn, 

Maine and elsewhere. 

More than 25 years ago, Congress created Amtrak to consolidate 

and strengthen our national passenger rail system. Watching the 

success with which new and higher-speed rail service swept 

through Europe and the Pacific Rim, we recognized the opportuniVerDate Apr 24 2002 09:19 Dec 10, 2003 Jkt 085968 PO 00000 Frm 00110 Fmt 6633 Sfmt 6601 S:\WPSHR\GPO\DOCS\85968.TXT SCOM1 PsN: CAROLT
107

ties that rail service could provide as a part of our overall transportation system. 

But today, the Amtrak system remains incomplete and the system faces many challenges. While Amtrak provides rail service 

throughout this nation, a variety of factors—including lack of investment in the future of rail, and the failure of Amtrak to operate 

like a business—have combined to keep our national rail system 

from attracting the type of widespread and popular usage that has 

marked service in most other modern, industrialized democracies 

in Europe and Asia. 

I believe that if we are to confront our great transportation challenges—including air traffic delays and highway gridlock—an enhanced nation-wide rail network must be part of the solution. And 

yet, investment in our national passenger rail system has traditionally lagged far behind investment in highways and air travel. 

A 1993 CRS analysis of per capita federal spending on transpor- tation noted that while we spend $79 per person for highways and 

$44 per person on the Essential Air Service subsidy program 

(under which certain air travel markets are subsidized by the federal government), Amtrak received only $27 per person. 

Federal spending on other modes literally dwarfs our investment 

in rail, and spending on other modes has been increasing over the 

last 20 years, while spending on passenger rail has remained flat 

or declined. Meanwhile, the U.S. ranks among the bottom of all 

major industrialized nations in terms of support for rail travel. 

Nonetheless, I do believe that Amtrak must be able to meet the 

next century as a financially efficient and independent entity. On 

this, I think we can all agree. And Amtrak has committed to 

achieving this goal. In this day and age when not just every dollar 

counts, but every cent, I believe we are rightly placing the burden 

of proof on Amtrak. Amtrak certainly faces enormous challenges. 

The GAO and the DOT IG have both identified challenges that I 

believe Amtrak must overcome in order to become self-sufficient. 

We must address these issues forthrightly. 

But there are some positive signs as well. Moody’s Investor Service has issued a high credit rating to Amtrak, based on the expectation that the service would become self-sufficient. Standard and 

Poors issued a positive report about Amtrak’s performance as well. 

In addition, Amtrak has developed an impressive service guarantee, under which passengers who are not satisfied may receive 

vouchers for free travel. And Amtrak recently reported that August 

2000 capped its best summer ever! Nearly 2.1 million passengers 

rode Amtrak in August, a 21-year high. As a result, Amtrak set a 

record for ticket revenue last month. 

Amtrak will testify here today that it will indeed achieve operating self-sufficiency by 2003. There are critics who will question 

the numbers and Amtrak’s financial assumptions, and I believe 

that Amtrak must convince us. After all, as I have said, this Committee put Amtrak on this track in 1997. 

This is certainly no time to turn our back on national passenger 

rail. 

So I look forward to working as a Member of this Committee, 

Amtrak, and others to confront these challenges. Once again, I 

would like to express my appreciation to the Chair and my thanks 

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to the witnesses for sharing their insights on the current standing 

and the future of Amtrak. 

Thank you. 

I thank the witnesses. This hearing is adjourned. 

[Whereupon, at 11:50 a.m., the Committee adjourned.] 

(109)

APPENDIX

UNITED RAIL PASSENGER ALLIANCE, INC. 

August 24, 2000

Hon. JOHN MCCAIN, 

Chairperson, 

Senate Committee on Commerce, 

Science and Transportation, 

Washington, DC. 

RE: AMTRAK

Dear Senator McCain:

Thank you for this opportunity to present the views of the United Rail Passenger 

Alliance on reorganizing how the United States provides intercity rail passenger 

service. 

The current scheme involves use of a single, monopoly provider, the National Railroad Passenger Corporation, known as Amtrak. Amtrak was formed in 1970 to federalize passenger rail service as part of a successful federal effort to revitalize our 

railroad industry. Nowhere else, however, does America embrace a monopoly service 

provider, and Amtrak rail passenger service suffers the same shortcomings as any 

monopoly: very high costs, limited output, little or no meaningful innovation, and 

no growth. 

Amtrak’s output is lower and its service network smaller, and its costs and operating losses are higher, than they were 10 years ago. Amtrak takes in, on average, 

more than three-quarters of a billion dollars a year in state and federal subsidies 

and will continue to do so into the indefinite future. Without that subsidy, it would 

immediately collapse and all of its operations in every market would cease. The rate 

of subsidization will not change, even if Amtrak reclassifies its losses from one nomenclature to another. The GAO recently reported Amtrak has over $9 billion in 

immediate, unfunded capital needs. Amtrak’s subsidies already total nearly $25 billion over the last 29 years. 

For this, we have underutilized but saturation levels of service in the Northeast. 

where load factors average just 35 percent, and a woefully deficient service in 90 

percent of the U.S. Amtrak does not even serve Phoenix or Las Vegas at all. Many 

huge city pair travel markets have no rail service between them, such as Dallas and 

Denver, Minneapolis and St. Louis, or Atlanta and Chicago. 

This does not have to be. 

URPA is convinced we could enjoy steady growth in our national system—on the 

scale of tripling or quadrupling output in a much larger service matrix—allowing 

our interregional passenger train network to become—like Conrail—a successful private sector taxpaying business over a five-year transitional period. We can also 

allow Amtrak to continue to pursue its high speed rail dream in high density corridors, free of the distraction of national markets it clearly does not appreciate or 

understand. 

But we cannot reasonably expect those results from the current organization, 

which has experienced only 29 years of unrelenting financial failure, and a shrinking national service. 

URPA recommends that the National Railroad Passenger Corporation be divided 

up, on the model of the highly successful breakup in 1984 of AT&T Corp., into a 

half dozen autonomous rail service providers, spun off from Amtrak as the ‘‘Baby 

Bells’’ were spun off from AT&T. These would include separate entities to own and 

operate each of our discrete regional corridor networks, one to take over interregional services, and leaving the Northeast corridor and its Acela program with the 

current Amtrak company and its management. Each entity could then focus all of 

its attention on a single business that it understands and values. 

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* The information referred to has been retained in the Committee files. 

Our detailed analysis of Amtrak and our plan for its reorganization are attached.* 

It shows how the regional corridors will operate as autonomous bodies, how the long 

distance operation must—and can—grow by a factor of 3 to 5 times today’s scale, 

and how these organizations will be empowered to compete with one another for 

business. Competition will drive innovation, efficiency and growth in rail passenger 

service, just as it does elsewhere in our economy. After the brief transitional period, 

the entity operating the long distance interregional trains like any successful airline 

will be completely free of any federal operating subsidy of any kind. 

We would be pleased to provide additional information if you wish. United Rail 

Passenger Alliance is an independent public policy research organization focusing 

on surface passenger transportation systems. 

Respectfully Submitted, 

ANDREW C. SELDEN, 

Vice President—Law and Policy. 

PREPARED STATEMENT OF ROSS B. CAPON, EXECUTIVE DIRECTOR, NATIONAL

ASSOCIATION OF RAILROAD PASSENGERS

Thank you for the opportunity to present these views. Our non-partisan Association—whose members are individuals—has worked since 1967 towards development 

of a modern rail passenger network in the U.S. 

Recent Amtrak Performance: We are encouraged by ridership and revenue 

trends of recent years. We are particularly encouraged by the public’s warm response to the two Acela Regional Boston-New York-Washington round-trips inaugurated January 31, which include 4-hour Boston-New York running times. This suggests to us that response to the faster new trains, and to more frequent Regional 

services, will be at the high end of projections. We remain painfully aware that overall ridership would be much higher except for stiff fare increases in 1995–96 to 

cover budget shortfalls. There is a conflict between the goals of maximizing Amtrak’s ability to ease highway and aviation congestion and of reaching operational 

self-sufficiency. 

High Speed Rail Investment Act: We strongly support the High Speed Rail Investment Act (HSRIA) and believe that, far from being inconsistent with the Amtrak Reform and Accountability Act, HSRIA supports the ARAA. The main goal of 

the HSRIA is to upgrade infrastructure that Amtrak already uses, increasing 

speeds, reliability and frequency of Amtrak trains and thus improving: their usefulness to the traveling public, their economic performance, and Amtrak’s bottom line. 

The benefits are not limited to short-distance corridor trains, since Amtrak’s longdistance trains also use most of the lines to be upgraded. 

By virtue of the requirement of a 20 percent state match, states will have considerable control over what investment takes place. We believe that the process 

through which states determine their willingness to make investments will be a 

major force to insure that the best projects get priority. This is the exact antithesis 

of the Amtrak economic nightmares of the 1970s when, for example, a high-speed 

turbotrain was effectively ordered to the low-speed, low-ridership-potential Washington-Parkersburg, West Virginia, route, and no state contribution was required. 

(Amtrak service to Parkersburg ended in 1981.) 

Although the HSRIA was introduced in November, 1999, just during the late summer of 2000 there has been a flurry of suggestions about ways to ‘‘improve’’ the bill. 

We do not have strong views on many of these details, only a concern that the revision process not kill the bill as Congress struggles to end its session quickly. It is 

hard to get 55 senators and 159 representatives to sign onto roughly the same piece 

of pro-intercity-passenger-rail legislation. If the process must be restarted next year 

with a substantially different piece of legislation, and with some of the strongest 

supporters of passenger rail no longer on Capitol Hill, it may be a long time indeed 

before tangible results are achieved. This delay could mean that any success or 

near-success Amtrak might have in reaching its ‘‘operational self-sufficiency’’ goal 

in FY 2003 could be short-lived. Attaining that goal is meaningless if Amtrak 

‘‘crashes and burns’’ within a few years for lack of ongoing capital investment. 

Alternate Funding Methods: If ‘‘substantially different’’ means a funding 

source other than bonds, success would be even harder to imagine. Congress has effectively ‘‘fire-walled’’ the regular transportation appropriations process, so that 85 

percent of funds are earmarked for highways, aviation and—to a lesser extent—

mass transit. The remaining 15 percent is barely enough to accommodate the Coast 

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Guard, the continued use of general funds for portions of the aviation and mass 

transit budgets, and ‘‘basic’’ Amtrak funding. 

Mode-specific trust funds, combined with the firewalls, bias federal transportation 

spending towards spending still more on highways and aviation, even in situations 

where rail could do the job better. It smacks of saying that highway and aviation 

trust fund dollars belong to the road and aviation lobbies rather than to the people—or that people are ‘‘drivers’’ or ‘‘airplane customers’’ when they are really travelers who use all forms of transportation and, in many cases, wish that good rail 

service was available in their own country the way it is in many foreign countries 

they visit. 

Obviously, we don’t agree with the firewalls, but that doesn’t change the reality 

that they exist. Indeed, efforts to maintain intercity passenger rail as the sole surface mode not eligible for Highway Trust Fund spending continue. A 10-year postponement of any opportunity to change that may be the price that passenger rail 

pays for enactment of HSRIA. 

Alternate Organization: The Amtrak Reform Council issued ‘‘a staff working 

paper’’ on August 22. This paper makes the case for placing Amtrak-owned infrastructure in a separate organization. We doubt the practicality of this, or the benefits of creating a new infrastructure organization with an even greater Northeast 

bias than Amtrak already has. 

Moreover, even in the Northeast, Amtrak does not own the entire corridor. It is 

unlikely that Metro North would relinquish ownership of its New Haven-New York 

line any more than Amtrak would want to lose ownership of Amtrak-owned lines. 

(The Corridor within Massachusetts is owned by that state.) 

Outside the Northeast, corridor ownership has begun to move away from the 

freight railroads. For example, the ex-Santa Fe Fullerton-San Diego line now is 

owned by the counties. Again, it seems unlikely that present owners would eagerly 

relinquish ownership to a new national organization of any kind, much less a Northeast-dominated one. 

Fundamental financing needs would remain no matter how the industry is organized. 

Finally, the suggestion that Amtrak could do fewer jobs better (i.e., be relieved 

of, for example, infrastructure ownership) seems to be sheer speculation. If there are 

problems in how Amtrak is managing activities in Chicago or on the West Coast, 

it does not follow that relieving Amtrak of Northeast infrastructure ownership 

means these other issues will be handled better. 

Thank you for the opportunity to present these views.

Æ